How to increase a business capital-tips?

[Dien Rice]

Originally Posted by joens1

Hi, my friend is assuming to start a small business, I query that to start any business what is a good business representation that would increase a capital without charitable shareholders run of business. Guide me, thanks in advance.

Hi,

It's not very clear to me what you're asking... Are you asking how to raise capital for a business?

Anyway, if so, keep in mind that there are generally three reasons (that I know of anyway) that a person will invest in your business...

1. They're your Mom or Dad, and they want to help get you going.

2. They're hoping to make money in the end. That is, for example, if they invest $10,000, they're hoping that in 3 years' time, their share of the company will be worth much more than that.

3. They get "excited" about the kind of business you're in, and would love to be "involved" in that kind of business in some way.

I have a friend who started a business during the "dot com boom" days. She got all her initial money from angel investors, not venture capitalists. (She was planning to later go to venture capitalists, but then the bottom fell out of the dot com boom before she got to that stage...)

Anyway, venture capitalists are pretty much always going to be "no. 2" type investors. If they don't see a potentially BIG return in it happening for them, then they're not interested.

On the other hand, angel investors (that is, rich individuals who are looking to invest their money) are a more varied bunch. Some are very "hard nosed" and fit into category no. 2. Others are more "emotional" about it all, and may fit better into category no. 3. Depending on what your business is about, your previous business experience, the experience of others working with you in your business, and so on, it may be easier to appeal to "no. 3" type investors than the "no. 2" types. Anyway, it's something to keep in mind...

One example of the "no. 3" type of investor are people who invest in independent films. Often, the investors will get screen credits as "executive producers" as part of their "payment" for their investment. That's partly because these are usually high-risk ventures, and they may never see their money again! Many people who invest their money in independent movies probably do it more for the "excitement" of being part of the movie industry, than to make big bucks out of it (since it's so risky).

Best of luck,

Dien