Home' Trinidad and Tobago Guardian : September 3rd 2015 Contents Q.: How do I raise capital to
start a new business? I had
some savings, but I used
the funds to try to get a
separate venture going. Un-
fortunately, it failed. What
should I do going forward
Most startups fail within
the first 18 months of
launching---about 80 per
cent, according to some
accounts---and so many
through their savings trying to keep their busi-
nesses afloat. My own first venture, selling
Christmas trees, failed when I was still in grade
school, after rabbits ate nearly all of our
seedlings. So you re in good company!
It used to be that entrepreneurs with cash-
flow problems had no option but to ask their
local bank manager for help. In recent years
our fellow entrepreneurs have been thinking
of ways to expand our options, and now start-
ups have more funding choices than ever
Crowdfunding, a disruptive innovation that
is changing entrepreneurship, has shifted the
balance of power away from traditional banks
and into the hands of the people who matter
most: the customers.
Take IndieGoGo, for instance, which uses
the reward-based crowdfunding model. As an
entrepreneur, you can make a video about
your idea and post it to IndieGoGo s site.
People who like your idea will donate money
because they want to make it a reality. In
return, you reward donors for their contribu-
tions, usually by sending them a sample of
your product or offering access to your service
once it is ready.
Another option is equity-based crowdfund-
ing: instead of getting a product sample in
exchange for donating, investors get a per-
centage of your business. This means that
buy-in is typically a lot higher. Entrepreneurs
usually raise more cash through this method
than the rewards-based model, but when the
round of fundraising is complete, they own
less of their business.
Due to its focused nature, online crowd-
funding works best when it targets a specific
community or subculture. So ask yourself:
Does your idea appeal to a certain community?
If so, then pitch your product to those people.
And when they give you cash to create your
business, you ve demonstrated that there s a
market for your product.
It may also be useful to look into whether
there are any grants available to you, which
governments sometimes give in industries
they are trying to support or grow. In Britain,
for instance, hundreds of grants are available
to tech- or innovation-focused enterprises.
Ask yourself: Is there a particular issue that
your government is desperate to solve? Does
your idea help to tackle that problem? If so,
you should research this option further.
Sometimes a mix of government support
and rewards-based crowdfunding is the best
way to go.
For example, the StartUp Loans Company,
of which Virgin StartUp is a delivery partner,
invites entrepreneurs in the UK to apply for
startup loans ranging from £500 (about
US$800) to £25,000 (about US$39,000). This
programme is designed to support startups
that have been in business for less than two
years. In the past 18 months, Virgin StartUp
has funded more than 600 businesses this
If you need a larger sum, you may need to
find an angel investor. You can locate angel
investors at networking meetups, industry
events, or through Web sites like
AngelsDen.com---an online community of
For industry-changing ideas that require
seed money in the millions of dollars, you can
look to a venture capital fund. Created solely
to invest in businesses, VCs aim to make huge
returns on their investment. If you get on their
radar and they like your idea, they will invest
heavily and become major stakeholders in your
business. They will want to have a say in how
the business is run.
Here s my advice: rather than put all your
eggs in one basket, it might be best to mix
options. Start off by validating your idea on
a rewards-based crowdfunding site, and raise
a small amount of money by marketing your
product or service to a targeted group of cus-
tomers. Once you ve established a customer
base, you re more likely to draw the attention
of an angel investor or VC.
Whatever route you choose, one thing s cer-
tain: The financing landscape has changed for
the better since I borrowed £300 (about
US$470) from my mother, Eve, decades ago
to set up the business that spawned Virgin!
(Richard Branson is the founder of the
Virgin Group and companies such as Virgin
Atlantic, Virgin America, Virgin Mobile and
Virgin Active. He maintains a blog at
can follow him on Twitter at
twitter.com/richardbranson. To learn more
about the Virgin Group: www.virgin.com.)
(Questions from readers will be answered
in future columns. Please send them to
RichardBranson@nytimes.com. Please include
your name, country, e-mail address and the
name of the Web site or publication where
you read the column.)
SEPETEMBER 3 • 2015 www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG13
Which funding model is best for you?
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