Do You Need Investors To Start Up A Business?

The morning comes, and the sun is peeking up from the horizon. It's raining outside. You sit comfortably near the window, looking out. Gently gripping your warm cup of coffee and sipping it slowly. And then it suddenly comes.

Out of nowhere, a brilliant flash of an idea strikes your brain. An idea of something new and exotic. Something that has never been done before. You write the idea down and pin it on your desk.

The experience of living for two decades teaches you to be skeptical. You ponder over the newly-formed idea, testing its defense, looking for gaps and prodding for weaknesses. A few months have passed, and you deem the idea to be solid and reasonable. The next step is obvious: Start your own company and become an entrepreneur.

Starting a business

To quote Elon Musk, "Starting a new company is like eating glass while staring into the abyss. If you need inspiring words from me to motivate you, don't do it."

Starting a new company is hard, more challenging than anyone can ever imagine. There's a reason why 90% of startup businesses fail. Among them, 21.5% fail within the first year. Any guesses why? It's not because they didn't work hard enough, or the idea wasn't ground-breaking enough. It's because they failed to secure funds for the startup.

There's one question people keep asking about securing funding for startup companies: "Do you need investors to start up a business?" While it's true that investors are a great help to secure financing, it's not the only way to secure funding.

Build proper traction

Entrepreneurs can't just have an idea and expect other people to give money to them. To raise money, entrepreneurs need to have something concrete that works and grows, and has traction. Traction means that entrepreneurs show people that: "Hey guys, we're operational, we have a working product, but it needs more polishing, please support us!"

Entrepreneurs will have a team or a co-founder to build their startup company with. Entrepreneurs want a vast network of well-networked people. The larger network equals better and more frequent opportunities for growth.

A good entrepreneur will also have a prototype or a sample to tinker with and show people. An idea doesn't mean anything if it can't be turned into a reality. If their product is an online service, they'll build a website first and make sure that it's working and as bug-free as possible.

Raise funds

Once the entrepreneur has built up strong traction, it's time to raise funds for the startup. When entrepreneurs try to convince investors to fund their startup, investors will want the money back in either the form of money or a stake in the company. Entrepreneurs will have to be aware of this and be willing to compromise to get the funding they need.

Contrary to popular belief, looking for investors is not the only way to raise funds. There are three ways to seek funding: friends and family, startup accelerators and investors.

Close friends and families

The first option should be the money from the entrepreneur's pocket and their co-founders. It's the safest and fastest way to get the money needed. However, most of the time, they'll find the funds inadequate. If the entrepreneur has a childhood friend with multiple luxury cars or a close relative with numerous mansions, it's time to call them and pitch the startup idea.

Startup accelerators

There are a lot of events and organizations built for the sole purpose of helping startup companies -- 500 Startups, Techstars and AngelPad are the most prestigious venture funding companies. They not only give entrepreneurs money to grow, office space, advice, and provide a community of like-minded entrepreneurs, but they also give entrepreneurs the most important thing: validation.

The only problem with a startup accelerator is that they're incredibly selective. Only startup companies that have extreme traction can get past the selection process. But rest assured, it's worth it.

Investors

Investors, or angel investors, as many startups call them, are people who want to invest in a company and seek profit in the form of equity or just cold hard cash at a later date.

The first step is to create a pitch deck, a presentation that contains an intro to the company, the essence of the idea and future plans. Make the presentation short and sweet, elegant and precise.

The next step is to search for investors. Entrepreneurs can use social media such as LinkedIn or the email contacts they have acquired. Once a potential investor accepts the communication, send the pitch deck.

The interested investors will send the entrepreneur an invitation to host a meeting. They'll ask the entrepreneur questions and try to destroy their idea. Take it as a test; if the idea is destroyed, absorb the critique and try to fix it. Either with changes made or more meetings, the investors may call the entrepreneur for fund negotiation.

Conclusion

The most challenging part of making a startup company thrive is funding. The most popular way to start a business is with the use of startup accelerators. They give entrepreneurs funding, and introduce entrepreneurs to investors, give entrepreneurs office space, startup advice, and validation. However, entrepreneurs will need to build traction first to get chosen by a startup accelerator.