What are the ways that companies can use to gain more funding?
- Initial Public Offerings
- Angel Investors
- Venture Capital
One of the biggest problems for companies, especially small ones and startups, is finding enough funding. They need it to sustain current operations or for expansion and growth. When companies are struggling with cash, business management consultants will recommend them to get funding from outside sources. All of those sources would help in attaining funding for the business which can help them progress towards their business goals with ease.
These are ways business owners get funding for their companies, without depleting their resources:
Initial Public Offerings (IPOs) are basically stocks in the market that are open to the public. Companies release public stocks for the purpose of gaining funds from people who are willing to be their shareholders. These funds would be used for business operations and other means of growth.
IPOs can come from anyone ranging from professional stock investors to ordinary people who believe that the company is worth an investment. The funds gained will go under equity financing. People who are willing to finance the equity of companies by paying for the stocks gives them a share of the brand ownership.
Your company may want to go public after you already built credibility and your brand reputation is trustworthy with the help of consulting services specializing in IPOs. The advantages of going public are:
- It will award the company with a percentage of the sold stocks
- You earn the possibility of earning millions since the price of your stock can possibly skyrocket, depending on the situation of the market and economy.
- You can use these stocks as a way to market your company
Angel investors are wealthy people who provide funding to your company from their own pockets. The title of an angel investor is an informal one and operate without a license. They can be identified by two categories, namely Business Associates and Non-Business Associates. If you would like to know more about how they are categorized, see more of the examples of business and non-business associates below:
- Business Associates
- Current and former clients
- Other businesses that are not direct competitors
- Certain employees
- Non-Business Associates
- Retired people with lots of experience in businesses
- Professionals you don’t work with (doctors, lawyers, etc.)
- People you meet from networking events
If your company is a startup, business management consultants would encourage you to get funding from these type of people because of these reasons:
- These people do not prioritize getting returns
- If they prioritize profit, they will make sure to take time to guide your business to do well.
- Simple deals and smooth transactions
When your business is bigger and has operated for at least two years, you can opt for Venture Capital instead of the aforementioned Angel Investors. Venture capital is a formal type of investing. Here, financial institutions, investment banks, and well- known investors will fund your business in exchange for investment returns.
Venture Capital firms invest from a professional standpoint which makes them more financially resourceful than Angel Investors. The difference between the former and the latter are as follows:
- They invest huge amounts of money, at least in millions.
- They will expect a profit. Therefore, firms only invest in small businesses with long-term potential for growth.
- The startups that apply for venture capital have proven that they quickly gained a loyal customer base. They just need money to fund their infrastructure, marketing, and other important operations.
- VC firms have a solid portfolio of startups they have invested in
In order to gain funding by way of Venture Capital, you will be required to have the following:
- A good company pitch that will attract the attention of VC firms
- Proper alignment with the firm during consultations and meeting
- Undergo company evaluation. This will determine the value of your company based on factors including:
- Past success
- Size of revenue and market opportunity.
- Your company valuation needs to be at least $5 million
Since getting venture capital is tricky, again, it is best to work with consulting services for guidance.
Sufficient funding will make all the difference in the growth and sustenance of the vision of a business. Although Getting enough money is one of the biggest concerns of companies, it is a good thing that there are consultants that can help guide them as they go along.
Receiving funding from any of the sources mentioned above would result in sustainable revenue and progressive business goals. Whether these sources would include IPOs, angel investors or venture capital, keep in mind that any of these ways would prove to be beneficial for the whole organization. To find out which of these are suitable for your business, call a management consultant near you today!