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On TRE Journal

Raising Capital for Innovative Business Ideas

There is no better time for aspiring entrepreneurs to start putting their innovative ideas into viable business opportunities.

There is no better time for aspiring entrepreneurs to start putting their innovative ideas into viable business opportunities.

Before we go into the subject of raising capital for your business there are a few steps that you should take to ensure you are ready for the life of an entrepreneur.

First we must understand the subject of entrepreneurship.

Entrepreneurship means different things to different people but one of my favourite definitions of entrepreneurship is given by the business dictionary.

It defines entrepreneurship as the capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit. The most obvious example of entrepreneurship is the starting of new businesses.
In economics, entrepreneurship combined with land, labor, natural resources and capital can produce profit. Entrepreneurial spirit is characterized by innovation and risk-taking, and is an essential part of a nation’s ability to succeed in an ever changing and increasingly competitive global marketplace.

Entrepreneurship is not just about creating a new business venture, it is a mind-set — a way of thinking and acting. It is about imagining new ways to solve problems and create value.

An entrepreneur is a leader so if you have been in employment you must upgrade your management skills to leadership skills. The focus changes from trying to please your boss to inspiring the people you lead.

The business idea is just one part of the venture, Entrepreneurs should know, right from the beginning, how to reach potential customers in an effective and affordable way.

To attract investment or funding an entrepreneur must be able to clearly demonstrate an understanding of business goals and how they are going to be achieved.
There is a saying that when one fails to plan, one plans to fail. There is an urgent need to develop a business plan.
The business plan will aid you in understanding how much you need for your business, your potential customers, how to reach them and your financial projections.
The Entrepreneur must also have an elevator pitch. An elevator pitch is a brief, persuasive speech that you use to spark interest in your business idea or in yourself. A good elevator pitch should last no longer than a short elevator ride of 20 to 30 seconds, hence the name.

With your innovative business idea, your business plan, and your elevator pitch you are ready to meet with potential investors and fund providers.

Partnership Funding
Many successful business ventures have been as a result of two or more partners coming together to identify a problem and how their business idea is going to solve it.
Partners are able to pull their savings, contacts and resources together.
Partners encourage each other during times of difficulty. Partners can also access capital, funding and investment together.

A few examples of such successful partnerships are

Google- Larry Page and Sergey Brin
Uber-Travis Kalanick and Garrett Camp
Microsoft-Bill Gates and Paul Allen

Crowd Funding
No matter how wonderful your innovative idea is or how passionate you are about it, you’ll need a certain amount of cash to get things going.
In today’s competitive marketplace, many businesses turn to crowd funding to get started.
In this context Crowd funding is using small amounts of capital from a large number of investors in order to finance a business. The whole idea of crowd funding is tied closely to social media, as people use sites such as Facebook, LinkedIn and others to push out the message. Crowd funding can attract large sums of money in a relatively short time.
Apart from using online platforms there are other traditional ways that we can use crowd funding. One can also access crowd funding through community or religious groups.
There is no legislature on crowd funding in Nigeria but one must be careful in doing this in other not to get on the wrong side of the law. You can speak with a business consultant or a lawyer.

Venture Capital
For start-up companies without access to capital markets or alternative sources of funding, venture capital can be an important source of raising funds. The risk for investors is high, but the venture capitalists usually get a say in company decisions
Venture capital is a type of funding for new or growing businesses. Venture capital firms specialize in building high risk financial portfolios. The venture capital firm gives funding to new businesses in exchange for equity.

There are a number of venture capital firms that provide this type of support for new businesses in Nigeria.
It is also important to note that venture capitalists will require the entrepreneurs to demonstrate that their business idea is viable, profitable and sustainable.

Angel Investors
Angel investors give you money in exchange for equity in the company. In this context an angel investor may be a successful entrepreneur, a wealthy business man or anybody who is capable of providing funding for your business.

Angel investing is one of the best strategies for raising equity capital. In fact, it is the most preferred small business financing option especially for startups. But unfortunately, most entrepreneurs have no idea how and where to find and connect with willing investors.
One of the reasons for this is that there are no directories for angel investors
Locating angel investors can be cumbersome, but it all comes down to your strategy.

There are also the conventional bank loans, government grants and entrepreneurship programmes but you cannot depend on any of these if you are serious about kick starting your business.

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