1 0 W A Y S T OR A I S E C A P I T A L

F O R Y O U R C H A R L O T T E S T A R T U P

Running out of cash is one of the top

reasons star tups fa i l . F ind the funding

you need with these capi ta l- ra is ing

strateg ies .

Credit: Busakorn Pongparnit, Getty Images

Raising capital is one of the biggest

hurdles startups will have to face

when building the groundwork for

their organization. Without the proper

funding, it won’t matter if your idea is

the greatest thing since iPhones were

invented.

 

Running out of cash is one of the top

reasons for startup failure, according

to CB Insights, and roughly 75

percent of startups fail within the first

year.

In order to combat startup failure,

entrepreneurs need to be more

strategic about raising capital for their

businesses. By understanding the full

range of options available to them,

startups can be more successful in

their capital raises and pave the way

for continued growth. There are lots

of resources available for Charlotte

entrepreneurs, and combining a few

of the 10 methods below can give you

a great starting point for your

business.

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One of the most common ways for

businesses to secure the cash they need to

get started is through self-funding or

“bootstrapping.” This is an important first

step for entrepreneurs because it signals to

investors that you’re serious about your

venture.

 

According to the U.S. Small Business

Administration, the cost to start a

microbusiness or home-based franchise falls

between $2,000 and $5,000. However, every

business is different, and the financial needs

of your startup may vary depending on your

specific industry. Drew Gerber, an

entrepreneur who started his own

technology company, suggests that those

within this space have at least six months’

worth of fixed costs on hand at startup.

 

Before starting your own business, be sure

to thoroughly research the costs associated

with starting out and moving forward. Once

you’ve done the homework and set aside the

cash, you’re one step closer to building up

your appeal with potential investors.

BOOTSTRAPPINGYOUR BUSINESS

M A C I E M A T AF O U N D E R , M A Z E S E R V I C E SC H A R L O T T E S T A R T U P

" S U R R O U N DY O U R S E L F W I T HP E O P L E W H O A R ED O I N G T H ET H I N G S Y O UW A N T T O S C A L EY O U R B U S I N E S ST O . "

Credit: StartCharlotte

Another great way to raise capital

when first starting out is through

your network of friends and

family. Who knows your talent,

passion, and ideas better than

your friends and family? Their

confidence in your abilities can go

a long way, not only in the form

of financial support but also in

helping to spread the word about

your ideas. It's important to note

that there are significant risks

involved with this method of

raising capital.

FUNDING FROM FRIENDS & FAMILYWhile your friends and family

members may be eager to give

you a loan now, your relationships

with them may significantly

change if your venture fails and

you lose their investment.

Be wise about the investments

you accept, and be upfront about

the risk involved with those who

want to help to avoid unnecessary

backlash if your business fails.

" W H E N Y O UF O C U S O ND O I N G T H ER I G H T T H I N G ,T H E R I G H TP E O P L E C O M E . "

D A L T O N S H A U L LF O U N D E R , O M N I L I F EC H A R L O T T E S T A R T U P

Credit: StartCharlotte

Entering competitions with cash

prizes is an excellent way for

startups to not only raise capital, but

to get valuable experience pitching

their ideas to potential investors.

Competitions of this nature usually

require you to develop a bulletproof

business plan, allowing you to

showcase your product or idea to a

panel of judges.

 

One of the biggest advantages to

pursuing this method is the media

coverage. Even if you don’t win the

competition, at least you will have

gained publicity for your startup as

well as the skills needed to pitch to

potential investors.

Some of the biggest startup

competitions in Charlotte include the

Atlantic Coast Conference InVenture

Prize, the Carolina Challenge, and

the Charlotte Venture Challenge.

COMPETITIONSFOR CAPITAL

THE UNIVERSITY OF

NORTH CAROLINA AT

CHAPEL HILL

IS AN EXCELLENT

RESOURCE FOR FINDING

AND ENTERING SOME

OF THE STATE’S MOST

EXCITING

COMPETITIONS.

RAISING CAPITAL WITH CROWDFUNDING

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Small businesses can also participate in

incubator or accelerator programs to gain

funding. Slight differences separate

incubator programs from accelerator

programs. While incubator programs seek

to nurture business, accelerators serve to

fast-track businesses for speedy success.

 

Through these programs, you’ll receive

valuable mentorship from investors and

get the chance to network with other

startups. It’s a great opportunity for

startups to gain insight from those who

understand the market and implement

strategies for sustainable growth to avoid

contributing to the startup failure statistic.

RevTechLabs, QCFinTech, CLTJoules, and

Packard Place all support Charlotte’s small

businesses through their available

incubator and accelerator programs.

BUSINESSINCUBATOR &ACCELERATORPROGRAMS

Banks can be a great resource for

entrepreneurs. If you have a solid,

well-structured business plan that

clearly outlines your profit forecast

and estimated time of maturity, this

might be a great option for you.

 

When applying for a bank loan, you

have two options: a working capital

loan and funding loan. Working capital

loans are designed to navigate one full

cycle of revenue generation,

leveraging limits with stocks and

debtors. Funding loans are more

involved, requiring a robust business

plan that clearly outlines the

company’s valuation and projection

report.

 

Loans from banking institutions can be

great for businesses seeking to fast-

track income generation. However,

there is significant risk involved with

such loans, particularly in the form of

collateral loss as this is a requirement

for most loans.

APPLYING FORBANK LOANS

" E D U C A T I O N I SK E Y . T H E M O R EE D U C A T I O N T H A TI S O U T T H E R E F O RP R O D U C TM A N A G E M E N T , T H EB E T T E R W E A R E A SA S T A R T U PI N D U S T R Y . "

R O B B A R K M A NF O U N D E R , P R O D U C T H QC H A R L O T T E S T A R T U P

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Acquiring a loan from a microfinance

provider can be a great option for

those who lack access to

conventional banking capital or

loans, or those with poor credit

ratings. Microfinance institutions and

non-banking financial corporations

(NBFCs) are able to distribute loans

to individuals without additional

legal implications like those provided

by conventional banks and credit

repair services.

While a great source for quick

capital, this can present problems

with repayment if the business ends

up being unsuccessful.

LOANS FROM MICROFINANCE PROVIDERSAlso, a microfinance loan tends to be

much smaller in size than those offered

by traditional banking institutions.

" P R O B L E M S W I L LA L W A Y S P O P U PA L O N G Y O U R J O U R N E Y .L O O K A T E A C HP R O B L E M A S AC H A L L E N G E . W H E NY O U V I E W S O M E T H I N GA S A C H A L L E N G E ,T H E R E I S A L W A Y S AW A Y T O O V E R C O M EI T . "D R E W B A R T E K , F O U N D E RG R O O V E W A T E R S P O R T SC H A R L O T T E S T A R T U P

Credit: StartCharlotte

Another way to secure funding is through

angel investors. An angel investor is

someone who already has a huge amount

of capital and who actively seeks out

businesses in which to invest. Many times,

angel investors connect in groups to

analyze business proposals and determine

which candidate is most worthy of funding.

 

Besides capital, the right angel investor will

also invest time in your business, providing

you the guidance you need to be successful

in your venture. Typically, angel investors

are much more interested in backing off-

the-wall business ideas as they anticipate a

higher return on their investment.

The Charlotte Angel Fund is a group of

experienced investors and is a great

resource for entrepreneurs in need of a

capital raise.

HELP FROM ANGEL INVESTORS

C H R I S D I X  F O U N D E R , T H O U G H T P O S T

“ T H E N E T W O R K O FE N T R E P R E N E U RR E S O U R C E S I N T H E[ C H A R L O T T E ]C O M M U N I T Y I S A L LY O U C A N A S K F O R ,A N D W E ’ R E T R Y I N GT O T A K EA D V A N T A G E O FA L L O F I T . ” 

Credit: StartCharlotte

SECURING VENTURE CAPITALSimilar to angel investors, venture

capital funds are managed by a

group of experienced professionals

that know how to find and fund

promising startups.

Rather than investing in equity,

these professionals invest in solid

businesses with sustainable growth

models. Once the business they are

partnered with is acquired or there

is an IPO, they pull out and seek

other investment opportunities.

 

Venture capitalists are invaluable in

that they provide much more than

just funding. Because their interests

are in the sustainability, growth,

and overall success of the company,

venture capitalists provide robust

mentorship and consistently

monitor your company’s progress.

If your company becomes very

successful, there are pre-designed

exit strategies that can enable you

to reap huge profits which you can

then use to re-invest in your

business.

 

While great for the short term,

long-term relationships with

venture capitalists are few and far

between as they will only remain

loyal to you until capital and

profits are recovered (typically

three to five years). You’ll also be

required to relinquish quite a bit of

control over your business since

you’re giving up a large part of it

to the investor. Additionally, since

venture capitalists tend to seek out

bigger companies with proven

stability, small startups will be less

successful in securing their buy-in.

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A great way to allocate the funds

you need is by finding a

government funding program.

You’ll need to submit your

business plan for approval by the

grant committee. Once your

business plan has been reviewed,

you’ll receive the grant funding.

Government funding tends to be

much larger in size, giving you

access to the larger funds

required for starting and growing

your business. However, due to

government bureaucracy, it may

be a long wait until a judgement

is made about your grant. And

when you do finally get an

answer, it may not be the one for

which you hoped.

FINDGOVERNMENTFUNDINGPROGRAMS

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Building a successful business

might be challenging —

especially when it comes to

raising capital. But working hard

to achieve your dreams is also

incredibly rewarding.

Consider combining the methods

outlined above to avoid running out

of cash for your startup venture.

For more resources on raising

capital, growth strategies, and

more, be sure to sign up for the

StartCharlotte newsletter and stay

up-to-date on all of Charlotte’s

entrepreneurial events.

CHARLOTTE INNORESOURCES FORRAISING CAPITAL

" C H A R L O T T E I S AG R E A T M A R K E T A N DH A S P R O V I D E D U SW I T H A G R E A T P R O O FO F C O N C E P T . "

Z A C K Z I T S O SF O U N D E R , M A M U M A R K E TC H A R L O T T E S T A R T U P

Credit: StartCharlotte