Raising capital

Raising money can be challenging and time-consuming. No matter how much money you receive, until you make a profit you will constantly be fundraising. A few things to keep in mind:

•       You will need more money than you think.
•       Your financial projections are likely understated.
•       It will take longer for you to ramp up your sales than you expect.

When it comes to the financial side of your business, be conservative on your financial projections and ask for twice the amount of money you think you’ll need. Cash is king in business; use it wisely.

Early Stage Investing

For space businesses, government grants are a great way to earn some startup capital to prove your concept. SBIR grants, among others, are offered for many innovative business ideas and best of all, don’t have to be paid back and don’t take any equity from your company.

Friends and family is a primary method for entrepreneurs to obtain startup capital. If you have confidence in your business, you should have no trouble asking for money. Keep in mind that this is one network you can’t afford to be without so understand what you’re asking for before risking their hard-earned cash.

Strategic partners can provide the necessary funds to help get your company off the ground. While you’re assessing the market and the competition, find some big players who may not be able to fill the niche you’re in. It’s sometimes more costly for large companies to fund new internal projects and you may be just what they’re looking for. Use some caution and common sense here, however. Some large companies have bad reputations for stealing startup concepts and even IP because they know there is a good chance you’ll be out of business soon. Read Protecting your IP for more information.

Customers are of course the best way to fund your business. Often entrepreneurial teams will contact potential customers during the business planning stages to inquire about their interest. If you have planned appropriately and the demand is high enough, it may be possible to get preorders and contracts before you have produced your first unit.

Angel Investors

Individual private investors or “angel investors” are very similar to VCs in that they provide cash in exchange for equity in your company. Angels invest in startup and early stage companies and provide some leadership experience with board placement and may help you find experienced executives to move your business to the next level. The funds provided by angels are much lower than you might expect from a VC, but it could be enough to reach a milestone and prepare for your next round of investment.

Venture Capital

Venture capital firms (”VCs”) are organizations that invest in business start-ups in exchange for ownership and/or control over the business. Don’t go straight to a top-tier venture capital firm with a business plan and inexperienced team and expect to get funded. These occurrences are quite rare because venture capitalists are extremely risk averse. They fund companies that they are relatively certain will be successful. Most companies that receive venture funding already have revenue and need the additional funds for growth. Expect to give up a great deal of control of your business if you accept VC money. Read the Pros and Cons of Venture Capital for more information.