Raising Money

To start your own startup and to do whatever you have to do for your startup, you will need money. You can be self funding or can borrow money from investors. Self funding is little difficult as the money needed is too much. If you want to create a product and become a product company selling its own product, then you will need money from the investors.

A startup can make you rich if it is successful. So, you need to work towards making it successful. Merely retaining the stocks will not make you rich. If you trade your stock for more resources so as to make your odds better, then that is not a bad thing.

Finding investors for your project may not be so hard. Though it seems to be a hard, mysterious job, actually it is not. Let’s see how you can get Investors or how you can get money for your startup

First of all, you will need a prototype of the product you want to create. For developing a product, you may need few thousands of money. This is called as seed capital. As the seed capital is lesser in amount, it is easier to collect.

You can get the seed money from an “Angel Investor” who is generally a rich individual. At this stage, you generally do not need a big business plan elaborating everything. Even one or few pages will be enough at this stage. You will get the answer, whether yes or no, within a very short time. You may even get a cheque for your seed money within a week.

Most of the angel investors may ask for a business plan. This is basically to understand what you plan to do and which they are investing in. You may be worried, specilly if you are not from a business background. Even after being from a business background, I feel nervous when someone mentions about the business plan. You should not be worried, as it is actually not so tough. At this stage of your startup, what you need is a simple brief description of the following things –

1. What you plan to do
2. How you are going to make money from the idea
3. Resumes of the founders

It simply may be what you are discussing among yourselves as founders. Simply write it down and show to your angels. It will also help you to have an idea of what to do and you can relate to the plan later in time.

Incorporation of a company

You will need to have a company so as apply for fund from the angel. You can simply incorporate yourself which means you can get yourself registered as a company. It’s easy. The tough part is deciding on how much stock each founder will get. You should discuss and then decide who will get how much of the share. It depends on the founders. Once you decide on the proportion of the stock and include in the incorporation agreement, then it is final.

There are lots more to do in starting a startup than incorporating it. You have to follow many things including insurance, tax, IRS,, license and so many things. But even if do not do all of them till some time, nothing will happen. No problem with that. But mind one thing- you will have to complete them in future. But don’t worry about. Just hire someone from the finance department such as a CFO, accounts people, law people who will settle everything for you. Startups do not have to hurry to do everything they need to do as a startup because many startup never actually get started.

Delay in incorporating and the penalty to pay

Delaying incorporating your company may cause devastating results and you may have to pay huge penalty for it. One of the would be founders may split off and then to your worst nightmare may start another company doing the same thing you wanted to do. So, you need to incorporate the company as soon as possible. Again you should make the founders agree to sign in a piece of paper stating that everyone will work only for this company and most importantly everyone’s ideas will belong to the company only.

Why to get the paper signed? Does it have very serious consequences if you miss out on this? The answer is yes.