Courtesy of Kuza Blog http://www.kuzabiashara.co.ke
“I have a game-changing business idea, but how do I raise capital?”
That is the one question in so many people’s minds and the reason why many ideas never see the light of day. To be an entrepreneur in this generation, you have to think outside the box when it comes to raising capital.
Below are a few ideas that you can implement.
1. Find a Business Partner
Having a business partner when starting out not only increases your capital but also boosts your borrowing power as a startup. A survey done by Inc that featured 500 companies stated that 28% of the businesses were funded by a co-founder. So if you have a brilliant idea but no capital, why not look for someone who has the money and bring them on as a partner?
Before engaging a business partner however, ensure their goals are aligned with yours and they add value by bringing something new to the table. There are also other advantages of having a business partner such as having a brainstorming partner, sharing knowledge & skills and having the opportunity to grow your networks.
2. Join A Chama
A chama (merry go round) is an investment group where members contribute a specific amount of money monthly. After each month, one member is awarded the money and the cycle continues until every member receives their share. Chama’s are not only a good way to save but they are also an exciting investment platform either as an individual or as the group.
However, before you partner up with a couple of your friends or family to start a chama, here are 3 important things to consider;
- Have a shared goal of what you want to achieve to avoid issues down the line.
- Run the chama professionally with designated roles for each member with accountability systems.
- It’s all about the choices you make. Make wise investment choices for the long term sustainability of your chama.
3. Take A Loan from A Family/Friend, Not the Bank
For those who have successfully launched a business, you know how difficult it can be to secure funding. For young upcoming entrepreneurs in particular, getting a loan from a bank can be quite challenging and that’s why some entrepreneurs turn to their friends/family for help.
Some advantages of taking a loan from a loved one are;
- You don’t have to go through tough hurdles that banks and other financial institutions put you through.
- You two can agree on a flexible repayment system that might give you a little grace period when paying back.
- Lower interest rates are also an advantage.
- You get to not only grow yourself but grow your family/friend as well and they will be proud to be part of your journey.
However, there are also a few disadvantages. Legal issues might arise especially if expectations are not met and your family/friend may also feel a huge sense of entitlement and control over the business. We strongly advise that before getting any support from family/friends, ensure you are legally protected, there are clear terms for repayment and defined roles. Another way you can involve friends and family is starting a crowd-funding campaign on sites like gofundme.com where they can send in their contributions and support your cause.
4. Join Start-Up Competitions/Awards
The business world is competitive in itself but for startups, the stakes are even higher. This is a challenge that start up competitions and awards aim at addressing by giving this upcoming entrepreneurs a platform to prove their value and get funding.
As a young entrepreneur with an exciting business idea, joining a startup competition is a great way to meet the right people, secure funding and build your brand. Another advantage is the funds do not come with tough expectations such as collaterals and high interest rates from other financial institutions. One other thing to note as well is winning such competitions is not a guarantee of success, you still have to work smart, have a great team and make wise choices to scale up.
Some popular local competitions you can take part in are;
- Kenya Startup Cup by Mount Kenya University
- DataHack4i by Nairobi Garage
- KCB Lions Den
Keep in mind that you’ve got to be flexible and open minded when looking to raise capital and if one method does not work, you can try others.