John Cradden outlines the various steps to funding your new start-up venture.
Amid the whirlwind and excitement of establishing your start-up venture, it can be all too easy to put off the point when you need to find essential funding, whether that’s to get started or to take it to the next level.
Finding start-up capital or finance can take a lot of time and effort, but breaking it up into a manageable series of steps can help you get to grips with it and build a strong sense of momentum.
If you’ve ever watched that well-known TV show Dragon’s Den, you’ll know that the search for funding is one of the best opportunities to meet people who could make all the difference to the long-term success of your start-up.
1. Draw up a clear business plan
If you don’t have one already, a business plan is an essential document that you will need to be able to share quickly with those in charge of prospective sources of funding. Business plans are stand-alone documents that provide a reader with an in-depth description of your business, its objectives, strategies, target markets and realistic financial forecasts.
As your Local Enterprise Office would tell you, a compelling business plan can help you prove the viability of your business, enabling you to secure funding or investment. A business plan also acts as a company roadmap. It should clearly state where you are, how you got there and how you plan to proceed.
Your business plan should cover objectives, sales, strategies, marketing and financial forecasts, over a short to long-term period. You can download our business plan template here.
2. Open a business bank account
This might seem like a simple task, but it’s worth paying a bit of attention to what kind of bank account you want. Consider whether you need a simple deposit account or something a bit more sophisticated if you are planning to trade online.
Sometimes a bank will need to see a business plan before they’ll set you up with a business account, but also think about your company structure. The Irish Investment Network suggests that you make sure you have decided one sort of company structure your business is going to take before approaching a bank.
“There are a variety of different types of business structure you can adopt and if you have a long-term vision for your business, it is often better to set up your business to accommodate this rather than having to change the structure or type at a later date.”
When it comes to opening a business bank account, while Ireland allows both residents and non-residents to open bank accounts, there is some due diligence involved. Limited companies need to provide a signed mandate from each director, while the owners of a Partnership will each need to provide relevant documents.
In addition, you’ll also need to provide a signed Certificate of Incorporation, signed copies of your by-laws, social security forms, proof of identity, proof of economic ties to Ireland, and in some cases, both proof of character and a legal opinion.
3. Research types of funding
There looks to be a wealth of choice for start-ups in terms of funding, and the options include crowdfunding, credit from both bank and non-bank lenders that are backed by the Government’s Strategic Banking Corporation of Ireland (SBCI) initiative, as well as microfinance loans through your Local Enterprise Office. There’s also venture capital, angel investors and various tax relief schemes such as EIIS (Employment Investment Incentive Scheme), not to mention a range of grants. But it’s worth assessing the pros and cons of each type of funding before you start making approaches.
For example, one of the potential downsides of using P2P (peer-to-peer) loans, for example is that they are not covered by the Deposit Guarantee Scheme, which means there is no immediate recourse or protection for any monies deposited with a peer-to-peer outfit. Similarly, opting for a venture capital fund or an angel investor could mean giving up some of your equity in the company.
4. Approach your potential sources
You can look at getting into incubator, pre-accelerator, or accelerator programmes depending on where you are in your start-up journey. These schemes are a good way to engage with advisors, industry experts and may also be a conduit to angel investor networks. If you’re still at college, most universities will have some sort of programme, but there are a number of organisations that together make up Ireland’s startup ecosystem, including NDRC, Dublin BIC, Guinness Enterprise Centre, Dogpatch Labs and your Local Enterprise Office. Engaging with any of these will help you build out a valuable network.
5. Curate your pitch
You might have a cracker of a business plan, but a viewing of any episode of Dragons Den will remind you that a poorly structured and prepared sales pitch can still sabotage a funding campaign. There’s lots of advice about how to craft a compelling pitch, and a lot of it will centre on storytelling. Craft a business story about why you came to set up your venture and what drives you as an entrepreneur will help you connect with your chosen sources, whether that’s an angel investor, a government-backed scheme or a bank.
6. Negotiate
If you’re dealing with a venture capital firm or an angel investor, you may need to engage in negotiations. According to Swoop, a digital platform that helps companies look for funding, you may need to create a term sheet, a non-binding document that outlines the funding being provided, the corporate governance set-up, and a list of options in the event the company is sold or liquidated. So it’s important to negotiate terms that you’re completely happy with.
7. Think about timing
People often underestimate the amount of time that can elapse between meeting investors and actually getting investment, which can be anything from six months to a year. Furthermore, the timeline between crafting your business plan or launching your business to meeting potential investors for the first time will be measure in months rather than weeks. Is your business able to survive between during these interim periods? Factor all this into your business plan.
