What is the fastest way to receive startup capital?
My company is a sole proprietorship looking for expansion. We want to purchase an IPO with startup capital. My personal credit is good, yet I can't seem to receive am affirming decision on startup capital. What is the fastest way to receive startup capital?
Hello, this is a great question and I'm happy to share my insights. I have experience starting businesses and helping start-ups raise capital. First off, investors do not want to provide funding to a sole proprietorship because it offers no tax advantages and the legal structure is not optimal for acquisition. Typically, investors look for a Delaware C-Corp legal structure because of the tax shelter and legal protections. Additionally, it's great you have good personal credit because that does factor into capital raising and some investors respect that you are transparent with your own personal finances. The fastest way to receive startup capital is by setting yourself up in the proper legal structure and developing a product or service that is scalable. Ask yourself, how will you generate revenue, through subscriptions, one-time payments or other? This is the most important question you will need to answer for investors. Furthermore, raising a seed round first would be your best bet. Typically a seed round is below $500,000 and this will give you a runway to launch your minimum viable product. I recommend researching Steve Blank and his business model canvas, if you can master his approach to launching a start-up then you will have a fighting chance at raising capital. Also, remember the journey will not be easy and the capital raising phase is competitive. Consider crowdfunding as well with the new JOBS act this is to your advantage. Best of luck!
There are many different ways to raise capital. Based on your question it appears that you are looking for growth capital since you already have the company and are looking for expansion.
In any event, it is important to look at it from the investors point of view and there are a few critical points to get across.
The first is to know your business and know your numbers. This does not always mean profit and losses because young companies rarely have this. More importantly you are going to want to have ratios, growth statistics, operating statistics that explain your business and how the money will be used. The important numbers vary greatly depending on the business you are in. Many times it can be as simple as number of qualified leads along with average time it takes to convert a lead to a customer.
Next, you want to find the appropriate capital. This will depend on where you are in the life cycle of the business. While equity capital can be expensive, it may be your best bet as it tends to be a longer term investment that frees up the business operating cash flow and allows for more room to raise future capital. For a more mature business, debt can be cheaper and provide the business owner with more potential upside. As long as your business can handle debt and not become constrained during tough times with interest payments.
The last part is the pitch. Once you know your target audience (bank, private investors, venture capital, crowd funding) you need to develop an investor deck so that you can approach potential investors in a clear and concise way. The deck should include important pieces of information such as uses of funds, business plan, and operating metrics.
While this is not all inclusive of the many considerations for finding capital, I hope it helps put you in the right direction. I have helped several startups go through this process and have seen many different levels of success. Best of luck.
A little unclear on what you're asking. Are you an investment company, looking to purchase IPOs?
Or - are you a business owner looking to raise capital for your own business? If the latter, its going to be tough until you have a few year's worth of P&Ls showing strong cash flow sufficient to repay a loan.
Some sources: SBA loan. Know, though, that you're getting into bed with the Federal government, and SBA loans are not dismissable in bankruptcy. Thinking about a worst-case scenario.
You can look into a home cash-out refinance. Also see if your 401K has loan provisions.
Beyond that, you'll be extending your own credit to your business.