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Whether you should bootstrap, borrow funds, sell equity (or some other type of security) depends on the owners personal preferences as well the business circumstances and needs.
Considering the combinations of approach and sources, there are 50+ ways to bring capital into a business. However, our clients can usually make the decision once they see the pros -cons of each viable option.
Each situation is unique but some things that should be considered include:
Send me a PM if you want more details.
Add the following to what advice you have gained here.
Here are a
few questions you may ask yourself that may assist you in making your decision:
1. 1. How long do you want to take?
2. 2. If you had a way to get your product to market quicker, what would that be worth to you?
3. 3. To get a loan it will normally take collateral. Often we use the equity in our home, etc. Are you willing to risk losing your home to launch this product when you have an alternative?
4. 4. If you used up all of your own personal resources and the product was still not on the market, what you then do?
5. 5. Would you rather have the complete mini pie or a big slice of very large pie? Can you share?
For many, developing an LLC separates their personal property from their company. If the company goes belly up their personal property is not lost.
In line with that type of thinking, many would rather find investors to cover the expenses of taking a product to market and keep their personal wealth separate. Others calculate that they do not have enough in personal resources to boot strap the venture. If statistics speak here, most businesses fail. Do you want to risk your personal property? When you find investors, they are taking on the risk, knowing full well that if your venture does not succeed, they will be saying good buy to their money.
To take a product to market often takes a team. How will you pay them? Will they be willing to take part equity in the possibility of the success of the business? If so, how hard do you think they will work with you to make it successful versus those that you would pay straight out to do a job.
Raising capital is no trip to the park. It is hard work. You must be knowledgeable about the process or you can just be wasting your time. If you don’t know how to approach investors or what they are looking for you will expect that they want to know about your business and how great your product is. If you think that, in most cases you will be wrong. They are only concerned with how much they will make, how safe the investment is and how long it will be before they see their return on investment. This must all be spelled out in your business plan.
If you think you can do it as the lone ranger, think again. That would be the riskiest possible scenario. What if you become ill, get killed in an auto accident, or die in some other manner. What then? An investor wants to see a reputable team working together. If no one can take the reigns if you were not capable of continuing the project, they would want to see that you have the project insured.
Having the right team can accelerate your process. Having the capital in the bank as you start your venture can accelerate your process. Knowing what you are to be doing every step of the process can save you from going belly up after putting years of time into your project.
So, do you want to have investors?
I`m not sure if you meant the above for me or Rob.
Have you identified how much capital you want to acquire?
Funding your growth through loans (debt funding) is cheaper in the long run and allows you to keep all of the equity.
If you and or the business is not able to borrow the $500K - then you should consider a strategy that involves the sale of a security.
As mentioned in a previous post - the decision shouldn`t be made lightly. It is, however, quite possible to acquire $500K with a securities approach.
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