Approaching investors and banks to fundraise your startup might be the first door you would knock. However, if like me, you don’t want to let go of control or to be under loan stress those funding solutions are for you to consider:
Yes, this is the first option you have. If you believe in yourself and your business idea, you should be the first one to invest in your own business. If you can’t make a financial commitment to your own startup, don’t expect someone else to do so. Make some calculations and set aside your personal living expenses and then invest your savings partly or all of it! This way you ensure the delay of venture capitalists’ interference. It is also a great way of proving your commitment and faith to potential investors.
Because crowdfunding is about getting small amount of money from many investors, you would be still the major shareholder. There are two main types of crowdfunding platforms: an equity crowdfunding and a reward-based crowdfunding.
In an equity crowdfunding, many contributors support your project by investing small amounts of money, (SAR 1500 minimum) and get in exchange small equities (shares) in your company. In a reward-based crowdfunding, contributors receive in return for backing your project, rewards and not shares. Based on their contributions, which may vary between SAR1 and SAR1500, you define yourself the kind of awards: usually items or services that you produce.
Both of them are secured through online platforms. To apply, you have to create an explanatory video about your project and provide supporting documents, like business plan, financial model and business valuation (in the case of the equity crowdfunding).
In order to collect and receive the needed funds, I recommend that you set a reasonable fundraising goal. There is no guarantee that you will get “your money” if you exaggerate or overestimate the amount you want to create a call to action for!
The fundraising period expired and the goal unreached, you lose the opportunity to get the sum that has been raised but remained less than what was planned and expected. The money in this case is reimbursed to the contributors.
In a nutshell, bootstrapping is a self-funding method that focuses on lowering your operating expenses while creating a revenue generating product. Let’s give an example to clarify the concept. When I wanted to build the second version of Deerassa platform, I turned my living room into an office to cut rent expenses and offered consulting services. The money I got as consultant was used to fund the platform, our main product.
You have the choice to approach investors or banks for funding. Yet I strongly believe, based on my experience, that as an entrepreneur, one can try to do things first alone before knocking at big corporations’ doors.
For me, it is much tempting to choose the self-funding options for it allows holding the majority of company’s shares and maintaining the decision-making power.
I do remain my own boss. And this is worth taking the challenge!
Khawlah Madoudi, EMBA