6 Tips to Funding your Start-up Business

Finance has been a major issue for most people that have ideas but today, I would highlight various ways you can fund your start up business in Nigeria.

1. Friends and Family: Obtaining fund from friends and family is the most common and old way to start a business. Friends and family most times are always willing to support you or fund your business while it may be harder to convince investors or banks of the quality of your idea, your family and friends often believe in your dream.However this way of funding your business also depends on the type of capital required and the size of the business. It is also advisable ensure your idea is well projected and legal advice is been sought especially when the fund is a loans.

2. Business Loans: Loans are monies borrowed with a requirement to pay. This requirement includes interest rate and the time period. Business loans can be obtained from the bank. Although there are also government initiated fund schemes for startups through its agencies. These agencies includes BOI, DBN, and NIRSAL AND CBN Intervention Funds. Access to loan from banks or microfinance for startups might be difficult because of high interest rate and repayment pattern. Which is why a startup business should have its business plan, financial projections, revenue flows and its ability to pay back.

3. Crowdfunding: Through the advancement of technology, crowdfunding is another digital solution for raising funds. This is a platform that enables a founder or startup business owner to raise funds from the public. Hereby pitching its business idea to a willing investor online. Investors may receive equity in exchange or a percentage of interest over a period of time. Crowdfunding is particularly advantageous to founders because they can decide the terms of the investment and easily retain control of their company. However Equity-based crowdfunding in Nigeria is potentially regulated by the Securities and Exchange Commission (SEC).

4. Incubators and Accelerators: Another way of raising funds is through incubation. The Incubators and accelerators nurture and prepare startups to grow. Incubators are focused on startups at the conception stage while accelerators target startups that are viable and ready to scale. Startups who successfully pass through incubators or accelerators typically receive a seed investment at the end of their program from the incubators/accelerators or investors/mentors introduced to the startups in exchange for nominal equity. Examples are Ventures Platform, Co-creation Hub, itanna etc.

5. Angel Investors and Venture Capital Funding: The Angel or seed investors are typically known invest in early startups at the beginning of their lifecycle while venture capital investors usually provide funds to startups that are viable with a recognized customer base and established revenue stream. These funding sources provide much needed capital in exchange for equity in the startup. The terms of the funding and equity participation are contained in agreements such as Simple Agreement for Future Equity and convertible loan agreements. Examples are Greenhouse Capital, Spark Capital, Greentech etc.

6. Bootstrapping and Full Employment: Lastly, another way of funding a startup business can be through bootstrapping whereby you self-fund your business. This is most common in Nigeria. Its mostly comes from personal servings and salaries from a full time job.


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