We have earlier written, how to collect your team for a startup. When you have the team, and of course the idea, you must start to think the next steps. Normally you need money in this point. Basically you have the following options:
1) you and your team can work for free and have some money to pay mandatory things,
2) you have money and you are ready to use it,
3) you get money from people you know,
4) you get loans from banks,
5) you start to look for investors (persons, venture capital firms, or other investment companies).
There are other options too, but I think these are the main options.
Sometimes it makes sense to start with your own money, and try to keep salaries as low as possible. This is especially true for many web and mobile companies, because it is not easy to get money for an idea. First you must prove that you really can execute and get also some users for it. But sooner or later you need money. Normally it is not possible to get a bank loan for a software or web company, when your assets are only the idea and competence.
It is often the easiest option to try to find friends and family members to invest in your company. But you must really consider before you do it. Can they help your business otherwise, do they give credibility to your business, and what happens if you lose the money? I would recommend to find investors that really like your business idea, are ready to support it, and gives credibility to your company. But it doesn’t mean that they must be venture capitalist. They can be business angels, experts of your business area, connected persons in your key markets, or ordinary people who see an opportunity or something important in your venture. You can also think strategic investors, i.e. companies that operate in the same business area and could be also your partners or an exit route in the future.
There is no right or wrong investors. But what I really want to emphasize, you must consider, what kind of investors you want, and what does it mean to your company and for yourself too.
Too many entrepreneurs just take money if they get something from someone. It is an easy and nice way to start a company and pay salaries. But seriously, if you get wrong investors, it can also kill your company, or one day you notice that you are outside the company, or your idea actually was never implemented. Of course, companies must change a strategy, if the old one doesn’t work, so you as entrepreneur must be flexible with your ideas. At the same time you must remember, when you select investors, it can be the most important decision you make in your company. That’s why you should really try to find investors you want to get and with whom you can make a success story!
Next time I write more about investment instruments.
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