Do you want to… raise some funds?
17 August 2022 | Newsletter
Welcome to The Fight for Fairer Funding newsletter where we share the latest in the fight for fairer funding in investment, raise awareness and provide education in line with our Mission. This newsletter from Funding Focus founder, David B. Horne, is part of the platform that sheds light on the uneven playing field that female and under-represented entrepreneurs of all genders face when it comes to raising capital for their businesses. We hope you enjoy it!
Read our latest edition below.
As entrepreneurs, you’ll know that growth is key to success. But expansion often requires money. Thankfully, according to my good friend, Daniel Priestley, this is the ‘age of the entrepreneur’ and there are many ways you can raise the funds you need.
Long gone are the days where your only choice was to trudge down to your local bank, business plan in tow, with your success in the hands of the bank manager. There are many options, but it is vital to consider the most appropriate route for your business. From crowdfunding to private equity, I’m going to be helping you identify the best method for your company, so you can achieve the growth of your dreams.
Before we dive into the details of the different funding available, I want to pose a serious question. Do you really want to raise money?
In my years in business, I have found some people for whom raising money just doesn’t work. Here are a couple of the types of people I mean:
- The Equity hoarder — You’re afraid to lose control of your equity
- The Frugal Leader — You’re afraid to spend money
It is important to note that when you raise funds, whether by taking on a loan or selling equity in your company, you are giving someone else the right to have some say over how your business is run. Some entrepreneurs we know prefer to have total control. If this sounds like you, then raising money might not be the right thing. Consider the question; Would you rather own 100% of a shop or 1% of a retail empire valued at £100 million? There’s no right or wrong answer, but it’s an important decision to make.
The chapter, “Do You Really Want To Raise Money?”, in my new book, Funded Female Founders: How to traverse the uneven playing field and secure funding to grow your business talks about Equity Hoarders and Frugal Leaders in more detail. Have a read to learn how you can break free from any psychological demons that are standing in the way of your growth.
This covers step 1 in our 6-step guide to kickstarting your fundraising journey. Check out the rest of the steps below. We’ll go into more detail on step 2 in the next edition.
For our entrepreneurs based in the UK, here are a few others other details to consider before you kickstart your fundraising journey:
Business Set Up
It is critical that your business is set up as a limited company. This is something we advise all entrepreneurs do, regardless of whether they are seeking to raise capital or not. Operating your business through a limited company makes sense on so many levels. It protects you legally by separating your business from you as an individual, it is often more tax efficient for paying yourself, and for companies registered in the UK, it allows you to take advantage of some very attractive tax breaks that you can offer to your investors
Debt or Equity?
You need to decide whether to take the debt or equity route when raising funds. There’s an important distinction to make: when you borrow money, you have to pay it back. When you raise money by selling equity (shares in your limited company), your investor has an ownership stake in your business. You don’t have to pay them back, but if you sell your business they will be entitled to their percentage stake in the price you sell for.
Business Plan
Ensure you have a robust, considered and thorough business plan. It should set out what the business is, where it is today and the direction you want to take it in. Keep it clear and simple. Identify milestones you want to work towards and include these in your plan. Clearly state how you will use the money raised; this will not only give you clear goals, it will also enable potential investors to understand what your business is and where it’s going. Certain companies may require more detailed business plans than others, but to get started, find a good template and work from there. Some useful examples can be found here.
Do you have any questions related to starting your fundraising journey? Let me know in the comments below!
Until next time…
With love and gratitude,
David
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You may also enjoy our Hear Your Money Myths series where we answer your everyday money questions in under a minute!