Raising seed capital for your business is probably one of the hardest tasks for any business owner. Without a tested product and a refined business model it can prove to be a difficult task.
As the owner of the business you have the responsibility of finding ways to raise startup capital. When you begin you can probably run the business on a shoestring budget but in order to achieve growth you will need to get more money.
There are a few fundamental questions you need to answer:
- How much money do you need?
- When do you need this money?
- Which are your options for sourcing these funds?
- What are you willing to give in return for the funds?
Capital can be in form of debt where a loan is extended to you or by equity whereby you give up shares in your company based on an agreed valuation of your company. Most institutions like the youth fund, Uwezo fund and even financing from a relative are debt based. You need to go through the terms of these financing agreements to make sure they are not too ambitious for you.
Most people or companies that can avail the funds that you need require you to explain why you need the funds, how you are going to use the funds and also the returns that their funds will generate.
You need to show projections and also create milestones that will be used to measure your progress should they offer you the funds. Often most people require you to present them with a business plan. A business plan outlines all aspects of your business and enables someone to understand what your business is all about.