Startup: search for an idea, funding, directions
Many aspiring entrepreneurs are looking for sources of business financing to start their own business. It can be a loan, investment or receiving a grant. In the article we will talk about the features, advantages and disadvantages of these types of investment.
Content of the article:
Today, there are plenty of ways to find money to start a business, which allows a novice entrepreneur to organize a small, medium or large business.
Main sources of funding
Distinguish between external and internal financing. Internal is the use of equity capital (net profit, deductions), and external - in the use of borrowed and attracted capital.
The organization of entrepreneurship often requires external investment. This can be a bank loan, third-party investment and a grant. We will consider the features of these types later. In the case of organizing a business with minimal investment, you can use self-financing. Naturally, this is the best option, because you do not have to pay the interest rate or “share” your new source of income with someone.
Direct and debt financing
Today, debt financing is considered the main source of raising money. It is beneficial in that it does not imply a partial sale of the business to another person. Often, raising debt capital bring good results. The main purpose of such investments is not to gain complete control, but to fix income for a period of 1-3 years.
Direct investment is an equity investment to generate income and become eligible to participate in the management of a company. The investor has the right to participate in the board of directors, he influences the formation and change of the business management team, proposes strategies for the development of the enterprise. As world practice shows, direct investment is the purchase of more than 10% of the authorized capital of an enterprise.
The investment method is chosen depending on your goals. If you are going to open a large production, it is much more efficient to lease equipment.
How to get funding?
Starting your own business is a way to gain financial independence and channel your abilities and ideas into a profitable channel. But starting any business requires funds. Business financing is the main condition for the full development and expansion of the planned enterprise.
Types of business and project financing
Financing based on a business plan is the most risky investment. Therefore, investors demand guarantees and independent expert examination of the project.
If the amount of investment exceeds reasonable limits or the project raises doubts about the profitability, then in order to attract investors, favorable conditions are offered for them or reliable sources provide their guarantees of the success of the project.
Initial financing of a small business usually comes from the entrepreneur himself. Having drawn up a business plan and making preliminary calculations, he applies to the Employment Center or the Center for Entrepreneurship Assistance in order to receive state financial assistance provided for by law.
There are several types of financing in the business. This:
- internal funding;
- external funding.
How to find financing for small and medium-sized businesses, you can find out in this video:
Internal investment is based on investing part of the profit in business development and working capital, depreciation charges (small businesses practically do not use this type of self-financing) and the allocation of funds for raw materials, equipment (fixed and circulating assets).
Translated from English, the term "startup" means "startup". More specifically, a startup is a business project in the initial phase of its existence, which is characterized by innovation and uniqueness of the idea, as well as the ability to scale. These three criteria fundamentally distinguish it from other forms of business. Riskiness is another feature of such business projects: the work of startups is always focused on the implementation of a new service or product, so the success of an undertaking cannot be guaranteed.
Where to start? Searching for an idea
Finding a good idea for a startup is one of the most difficult stages of work. It seems that everything has already been invented and implemented, and there are simply no options for new lines of business. Nevertheless, hundreds of new projects are launched around the world every day. Some of them will stand the test of time, most will fade, but one way or another, if people generate unique ideas every day, then so can you. Try the following guidelines for finding your new business. Choosing a startup idea is a difficult task.
Don't try to find ideas, look for problems and solutions
Searching for an idea as such can lead to a dead end. It is much wiser to temporarily abstract from the ultimate goal and think about life:
- What annoys you in everyday life? What can be changed from this? Perhaps some little things prevent you from concentrating on work or rest, you would like to do some action faster than you are doing now. Ask the same questions to your family and friends.
- What do you know best about? What issues would you like to improve in this matter?
- What problems are most often discussed by the media in your city or in the country as a whole? Can anyone suggest a solution?
After you have enough food for thought, formulate and write down the main issues that you think are most relevant.
Then study the information on the relevant topics: how these problems are solved in foreign countries, is there any research and development in these areas. Mark Zuckerberg, founder of Facebook, said in a 2021 speech at Startup School, "Research what you want to do before you do it." It is worth listening to the opinion of one of the most successful startups of our time.
Mark Zuckerberg is a successful internet startup entrepreneur
The information received will certainly lead you to an interesting business idea for a startup (see The most interesting startups in Russia and around the world).
Not everyone can “knock together” the starting capital. This takes years, ability and luck. Lending as an alternative is a rather risky process, which is associated with the risk of "getting bogged down" in a debt hole.
Of course, there are tons of other ways. However, many of them are aimed at obtaining financing for existing enterprises (their expansion or reformatting). It is more difficult to find funds for a new project, because the risks regarding its successful implementation and prospects are many times greater.
And everyone, as you know, loves guarantees. Meanwhile, it is still possible to find an investor for your own project. We will figure out where to get money for a business from scratch, and what ideas should be implemented.
What ideas are worth considering
However, life makes its own adjustments, so about 15% of people earn on hobbies.
It's never too late to create your own business, which will allow you not to depend on the opinion of your superiors, will bring satisfaction and good money. The question often comes down to capital.
But even if you manage to find money, what is the probability that the result is worth the investment? Half of the companies founded turn out to be unprofitable and close in the first year or two. At the same time, whole structural divisions of large companies are engaged in the development of business ideas. So is it possible that a "picture" that has arisen in the head of an ordinary person or a dream cherished since childhood can be successful? The answer is yes.
The stories of the following "lucky ones" confirm this:
- Brad Hughes was in the real estate business when he had the idea to install automatic lockers along the freeways. The creation of such a business brought an already former employee of the Property Research syndicate $ 5.3 billion.
- Jeff Bizos earned his $ 4.4 billion by building a virtual store selling Amazon books. om. It is noteworthy that the entrepreneur's office was located in a small garage.
- Dmitrih Mateschitz and Kaleo Yudvikha have created a lucrative business on the hobby of nightclubs and parties. They created an energy drink based on caffeine and sugar, giving strength to a tired body. As a result, the popular drink Red Bull brought the co-owners of the brand in the amount of 6.1 billion dollars.
- Ty Warner, the son of an ordinary salesman, dropped out of college in order to pursue a venture that had been in his head since childhood. He started producing teddy bears. The trick was to produce toys in small batches. Customers really enjoyed collecting teddy bears in different clothes, poses and special expressions on their faces. The idea brought its inventor $ 4.5 billion.
In what area is it better to start a business from scratch, read here.
Signs of a Successful Idea
As you know, there are two main drivers of company growth: people and money. If one of these two components is missing, then the business will not work. When you are at the beginning of the journey, the question of money is acute and, at times, painful: where to get it and not get into huge debts?
We decided to find out how to find funding for aspiring entrepreneurs and where to go so that the business would prosper and not burn out.
Why do you need money in business?
People often say that we cannot do something because we have no money: "Now, if we had a budget like another company or competitor, then everything would be great!" ... In fact, this is far from the case.
You have a certain monthly income, for example, 1 million rubles per month. If an amount equal to your annual revenue falls on your head, that is, 12 million rubles - what will you do with this amount? How will you spend it?
To answer this question, we need to look at why money is needed in business at all, depending on what stage the company is at.
If you have a startup, small business or individual entrepreneur with a small team, a small office (alternatively, virtual) - what do you need money for?
How to get to know your user and make money from it
Naturally, money is also needed for a rainy day. Young entrepreneurs will have so-called "black days" quite often, at least at first: the team has changed, a marketing mistake has emerged, sales have sagged, tax fines, and so on. Things like this happen all the time: this is reality, and there is no need to be afraid of it.
For a startup, these categories are perhaps the main ones.
What is "business without investment"
Previously, you could find posts on social networks where people said: "Become an entrepreneur in 90 days, start doing business without investment, don't spend a single ruble." In fact, you cannot make a business without investment. Because you need clients to get the business going. How to attract customers? We need to connect marketing, that is, money.