What are we talking about?
Most entrepreneurs do not have the luxury of having millions in their
bank account, especially not when you are starting out with a new
You may be full of amazing ideas and powerful ways of implementing
those ideas, but you need finance in order to be able to put those ideas
into action and make a successful business out of it.
Needless to say, this becomes one of the major challenges faced by
upcoming entrepreneurs: finding funds for launching and expanding
their start-up business.
Past & Present
The process of funding was quite tedious and difficult in the olden days,
but this is not the case now.
Today, people are recognising the importance and advantages of start up
business ventures. Start ups generate employment, create multi-skilled
workforce, and increase the entrepreneurial spirit, leading to the
strengthening of the country’s economy.
There are many options available for the financing of a new business
idea. However, figuring the source that suits your requirements and
type of business in the best possible manner is a multifaceted process.
As the name suggests, crowd funding involves taking money from the
public in the form of their private finances, by presenting your idea that
needs funding. This method is swiftly gaining popularity. Crowd funding is
a good option for financing a business idea as it offers not only funds but
also visibility through a platform to showcase your business to the world.
However, for this idea to work smoothly, it is important that you select like
minded people to ask funds and commitment from. Also, there should be
very clear knowledge and understanding of the business venture in the
minds of the people.
Some companies that have received crowd funding are Ouya (raised $8.6
million), Tile (raised $2.68 million), and Pirate3D (raised $1.44 million).
Investors lending money to start up businesses with the knowledge and
will to recognize and accept risk as well as demand relatively low
control and ownership equity in return. Usually, angel investors are
established entrepreneurs that have made their fortune and eventually
look at investing in new and innovative start ups.
The benefit of having angel investors goes beyond the finance as these
experienced entrepreneurs can give valuable business advice, guidance
Some companies that received angel investing are Google, Facebook,
Skype and Twitter.
It is a very common means of financing. Venture capitalists are private
investors who provide funds to promising start ups. With this type of
financing, budding entrepreneurs can acquire a hefty amount of capital.
The main benefit of venture capital financing is the possibility for company
growth and development that would otherwise not be likely through bank
loans or other methods. Also, repayment to these investors isn't essentially
a compulsion like it would be for a bank loan because venture capitalists
look for ownership to implement control to counterbalance any high risks.
Some of the companies that received venture capital are Facebook,
Solyndra and Western Integrated Network amongst many others.
Friends and Family
This comprises of money that is borrowed by an entrepreneur from his
family members and/or close friends in order to help finance his start
Acquiring money from friends and family is the most common source of
funds. The advantage of this type of funding is that such lenders are
flexible with respect to the loan amount, time period and interest rate.
This makes the financing process less complicated and tedious.
Availing a bank loan is another prominent source of getting funds.
People opt for bank loans for all kinds of financial requirements. This is
due to the fact that bank loans range within a wide bracket.
Bank loans ensure a long term relationship between the bank and the
firm which gives rise to the possibility of a smooth future
correspondence between the two.
As mentioned earlier, almost all the major businesses have taken
financing from banks.
What is more important?
Now, when you know the various ways of finding funds, it is necessary
to understand how you can use the money to grow your
Mara Foundation’s Ambition
We enable, inspire and empower ambitious entrepreneurs in Africa. With the support of our Mara Mentors we will:
Inspire millions of young people in Africa to become
Teach entrepreneurs new skills.
Enable entrepreneurs to turn business ideas into a
Guide business owners to grow businesses and hire
Empower entrepreneurs by providing a platform to
showcase their business and build their network.
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