7 sure-fire ways to raise capital for your startup
So you’ve got your big business idea and you just know it's gonna bring in the big bucks. You just need to convince a few other people first…
You might be so confident in your new business venture that you've already started planning out exactly how you'll spend your millions.
But while we have every confidence in your exciting new quest, it's worth being aware that it's pretty common for startups to fail at the first hurdle (aka getting funding!).
Starting a business as a student requires a lot of hard work and commitment, but perhaps most important of all it requires getting your hands on some dosh to get your idea up and running.
Without that all-important initial chunk of cash, you'll struggle to make your entrepreneurial dream a reality. Here's some ideas to get you started!
7 ways to raise capital for your startup
Ask friends and family
For most young entrepreneurs, the first investors to take an interest in their big ideas will be their parents, family and close friends.
And with your friends and family having a small stake, they’ll be more inclined to offer invaluable feedback on your business or product, and promote it through word of mouth.
It's a good idea to make this your first port of call, as if all goes well and you find you have someone in your life with a secret stash of cash they're willing to invest in your business, there might be no need to move onto the next step!It's crucial you treat any friends and family who invest with professionalism and respect. Remember this isn't free cash! Keep your investors up to date on where their money is being spent, and offer them constant updates on how business is progressing.
Crowdfunding for new business ideas (and tuition fees!) is extremely popular nowadays, and it's a pretty effective way to make cash – provided you have an interesting idea that will capture public interest.
The most well-known crowdfunding websites for startups are Kickstarter, Seedrs and CrowdCube. Bear in mind these sites all charge a fee of 5-7% of what you raise (plus an additional fee for processing your payment) but these fees are only deducted if you reach your funding target.
The potential to raise capital here is huge, and some of the biggest success stories in the UK startup scene began on crowdfunding sites. You might be better off looking to raise a smaller amount of seed capital and giving away a bit more equity, since the risk for potential investors is high.
Having a solid profile on these websites for your business is crucial. After all, this is all your potential investors will be judging your business on, so make it shine!
Approach angel investors
Mish Sukharev – FlickrAngel investors are essentially people with a lot of cash (normally very successful business people themselves) that they want to invest in the next big idea. Think Dragon's Den without the sneering and shady comments!
Not only will angel investors offer you a decent slab of cash to help with your business, but they'll even mentor you through your adventure, offering advice when you need it and warning you against common mistakes they've seen being made time and again by small businesses.
How to get the attention of angel investors is another mission you'll be faced with. A quick google should throw up some great options of how to get in touch with investors, but the UK Business Association website is a great place to start.
You should also keep an eye out for any pitching events and conferences where investors are likely to be, and enquire about pitching your product. Remember that smaller events can be just as effective as the big time ones – and you should never have to pay to pitch!
Try the government's startup loan scheme
Perhaps the quickest and most straight-forward way to raise seed capital would be through the government-backed startup loans scheme.
Backed by none other than Dragon's Den James Caan, the scheme is specifically aimed at young entrepreneurs, offering loans of between £500 and £25,000 to get your business venture up and running.
Loads of students have benefitted from government loan schemes for their businesses whilst still studying for their degrees – including these guys.
You would then be expected to repay the loan a rate of 6% over a maximum of 5 years – which is a decent deal as far as business loans go.
With this scheme, you’ll also be given a mentor and access to free business startup services. Get a solid business plan together and send in your application – you never know where it might take you!
Look into university schemes and competitions
You may not believe this, but there's a strong chance your university could be interested in investing in your idea – and will often even have cash set aside for budding entrepreneurs like you!
There's nothing universities love more than nurturing entrepreneurialism in their own students, and if your business is a success it's great PR for the uni too.
Try searching online for any young business competitions or funds associated with your university, and make sure you contact the uni careers department – they'll be able to point you in the right direction.
Fund it yourself
Easier said than done, right? But if you're really serious about getting your business up and running, you should be trying to put aside some cash to help fund it if you can.
We'd recommend setting up a student savings account with the sole financial goal of backing your business idea. Deposit any spare cash that comes your way into this account and leave it to grow with interest.
Funnily enough, the best interest rate currently on the market is offered by an online banking startup! Find out more with our guide to automatic savings apps.
Ask for a bank loan
We've stuck this one on at the end for the reason that it's a lot harder to get accepted for a bank loan as a young person, and the options mentioned above are more easily accessible.
Being accepted for a loan would rely on you having a good credit rating, and an extremely solid business plan. This is basically so you can convince the banks that you'll be able to repay their loan when the time comes.
Get working on that business plan and perfecting your credit score, and a business bank loan could be well within your reach!
Have you decided to set up a business during your time at university? We want to hear from you! Tell us your story using the form below.