Starting a business can be an overwhelming task, but no part of the experience is as daunting and intimidating then trying to raise seed capital. You can have the best idea and business plan in the world, but if the funds dry up, they aren’t going anywhere. So how does an enterprising entrepreneur raise the cash necessary to get her venture going?
The first sources many entrepreneurs try is their family and friends. This makes sense, especially if you don’t have an established track record that would be attractive to serious investors. Your friends and family know you and what you are capable of. If they believe in you and your idea and have the money, they will be more willing to invest than a stranger looking at the business plan of some guy off the street. Be careful though. You have to be sure to follow all professional standards in the paperwork. More than one business owner has been bit by the casual manner they handled investments from personal relations in the early days of their businesses. Make sure you treat a $10,000 investment from Mom and Dad the same way you would from an industry expert investing $100,000.
If you can’t raise money from people you know and don’t have any other connections, get out there and meet people who can. If you can, find someone who can act as a middleman and introduce you to serious investors, like other entrepreneurs who can be especially helpful since they know what you’re going through. At this stage, investors will demand a more well developed and researched business plan than your Aunt Sally, so make sure you do the work before you start handing out business cards.
There are also startup mentorship programs, like Y Combinator and TechStars, and angel groups, like AngelList and Open Angel Forum, that will help connect entrepreneurs with investors. If you are accepted to one, it is a great opportunity to get your ideas out there to people who can help make them happen.