There are many ways to finance your project. Depending on the degree of its advancement, we can use different solutions. In this article, we will present four ways of financing projects in three stages of development: an idea (or seed project), a project that generates its first revenue, and a mature company that has been on the market for several years and has regular contractors.
Having an interesting, prospective idea for your own business and at the same time suffering from lack of funds for its development, business start-up, creation of the final product, gaining first clients – we have several options. First, it is easiest to fund your activities with your own funds or money borrowed from family or friends (FFF, Friends, Family, Founds). This is the simplest, and often the most cost effective option, because your family probably will not count on that percentage as the bank does. Unfortunately, not everyone has the advantage of well-acquainted friends or parents – if we do not have them, perhaps it is worth to use the help of strangers?
Recently so-called crowdfunding platforms has gained a lot of popularity. This is an alternative way to raise capital from individuals, used by both start-ups and companies at a later stage of development. The thing is to get small financial contributions from a large group of Internet users. The entrepreneur presents on the website his project or new product for which he is lacking funds and at the same time indicates the missing amount and determines the deadline for making payments. An additional incentive for depositors is the payment in return for reward- the higher the payment, the more valuable the reward, starting with simple business gadgets, dedicated services or product copies, up to the offer of shares in the company.
The additional possibility of raising capital for start-ups is the grant from the EU. This form of fundraising can be seen as less attractive because the funds raised from grants have to be targeted and cannot be used in any other way. The most often awarded grants are for innovative initiatives, such as research and development for example in biotechnology or information technology,
In addition, as a solution used by startups, as well as targeted into entrepreneurs in the further development stage, is to find an investor in the form of a Venture Capital or Business Angel fund. These institutions finance the development of projects at different stages of development, depending on their investment profile. There are so-called seed capital funds, concentrating its activity around projects in the sphere of the idea and those, which already require some degree of advancement of the project. In one way or another, they must first be convinced that the project is (or will be) profitable and worth investing in. To do this, you need to prepare a teaser, a presentation and, above all, a solid business plan in descriptive and calculative form. Ideally, if a business plan is based on real business results of the company that is why we consider this financing method more advantageous for projects at the further development stage that have partners and can boast the first operating income. Normally, in return for investment, the funds and Business Angels expect to transfer some of the shares in the company.