From Bootstrapping To Angel Investors
David B Horne
Empowering Entrepreneurs to Achieve Exponential Growth | Entrepreneur | CFO | TEDx Speaker | Award-Winning Author.
Welcome to the Funding Focus newsletter where we share the latest in the Fight for Fairer Funding in investment. 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.?
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This week, we’re back to the education part of the Funding Focus Mission.?
As a female founder, taking the step to applying for funding can be tough. So you’ve decided that you’re finally ready to start seeking investment and you’ve prepared yourself and your business for investors, now it’s time to consider the type of funding you’re going to be applying for.?
There is debt funding which can be a useful source of funding for businesses at every stage, and it is vital for those who need capital, but choose not to sell equity. Particularly for businesses with physical assets and predictable cash flow, significant sums of debt funding are available. Debt does not dilute the owners’ equity stakes, but it comes with cash flow and compliance challenges.
Check out Chapter 5: Debt Funding in my book, Funded Female Founders: How to traverse the uneven playing field and secure funding to grow your business, for more on this.
I’m going to be covering the different types of equity funding available. When you raise money by selling equity (shares in the limited company), the investor has an ownership stake in the business. You don’t have to pay them back, but if the company pays dividends, the investors are entitled to their fair share. If you sell the business, they will be entitled to their percentage stake in the price you sell for.
From Bootstrapping to Angel Investors, here are the types of individual funding to consider:?
Bootstrapping -? where the founders fund themselves for bootstrapping
Friends and Family - help through the bootstrapping phase
Crowdfunding -? has democratised access to investment in SME businesses
Angel Investors - usually wealthy entrepreneurs who have successfully grown and sold their businesses, and can offer the benefit of their experience along with funds.
The full chapter in the book covers each of these sources in detail and includes examples related to each.?
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Here is an example of successful crowdfunding from this chapter:?
CROWDFUNDING SUCCESS FOR FEMALE FOUNDERS IN AUSTRALIA
An article published in The Chainsaw in 2021 featuring the Australian crowdfunding site Birchal (www.birchal.com) reported that female founders raised on average 25% more funding than male-led businesses on its platform during 2020, with the largest raise being $2 million by the Aussie cult hot-sauce brand Bunsters.?
The key to success in crowdfunding is an engaged community of fans and followers. These may be customers, suppliers or a wider community of people who support you and your business. In many cases, female founders have been more successful than their male counterparts in tapping into their fans and followers to secure funding.?
Crowdfunding is still relatively new in Australia. A female ride-sharing company called Shebah, which raised $3 million – including $1 million from one investor – is still the largest crowdfunding raise in Australian history.?
Matt Vitale, managing director of Birchal says equity crowdfunding is one of the few places to present a level playing field: ‘To the extent that such bias exists, equity crowdfunding has the potential to neutralise it, by providing founders with an alternative source of capital. We think this is a really exciting trend, that could help to improve the representation of other minority groups among startup founders.’?
Do you have any questions related to the different fundraising types? Let me know in the comments below!?
Until next time…
With love and gratitude,
David
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2 年David B Horne wow impressive newsletter that I think will give many budding entrepreneurs a boost
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2 年The conversation to choose which type of funding a business should go for is essential. It is the starting point to potential greatness. Thank you for explaining it to us.
I encourage business leaders to expel anxiety and install new thoughts based on their passions and purpose | Success Coach
2 年I'm a strong proponent for bootstrapping. I suggest using this route first, until there are some profits in the business.
CEO EIG Global Trust Ltd. Chief Operating Officer at TAG Partners Ltd.
2 年Fundraising can be a minefield without expert guidance David. Unless you know what you are doing then a lot of time and resource and therefore money can be wasted.
Senior Vice President, Private Wealth Advisor
2 年Great post David B Horne and this is every business owners challenge- how to best raise capital for growing a business