when building a business You definitely need funds. This capital is not in the form of finance only. It also includes experience, knowledge, skills and relationships. However, it is undeniable that financial capital is one of the most important types of capital. Of course, without capital Your company will not be able to stand it.
Company financial capital can be obtained in at least three ways, namely:
- with your own savings or proceeds from the sale of property
- with a loan from a bank, relative or other person
- by receiving investments, whether from trading partners or from other investors
Each method has its own advantages and disadvantages. in the following article The author will discuss the advantages of the third capital search option and some disadvantages.
1. Overcome Financial Problems
The advantage of the first method is that you do not need to share profits or pay interest. However, the disadvantage is that personal funds are usually quite limited. making it difficult to develop large companies
The advantage of the second method is that you can raise additional capital to expand the company. But you have to pay the principal and interest on the due date, otherwise your property will be confiscated. Because banks do not want companies with unclear history to borrow money.
In this case, the third option is best. You don’t need to worry about the principal of investing to investors. And just pay profits (dividends) and you will receive additional capital to develop the company further. In addition, investors who raise private capital are often individuals or institutions with a higher risk tolerance than banks.
2. Reduce the pressure to repay
as mentioned above Attracting investors to invest in your company You don’t need to be pressured to pay back the principal of your investment. You just pay dividends.
Not only because of the issue of risk tolerance. Investors also have other options if they want money or lack confidence in your company, such as selling company shares to others. or even negotiate with you to increase rights in the future
But the downside is that investors can become actively involved in your company’s financial problems. Whether it’s checking and making sure your company’s finances are in good shape or bringing financial problems to the general meeting of shareholders.
In some cases, this encourages companies to become “investors satisfying enterprises” rather than maintaining the quality of their products. Of course, this is not good for the company’s long-term development.
3. Diversification of the company’s investment
Given the pros and cons mentioned above, it’s not surprising that companies typically get their funding from more than just one source. but from multiple sources simultaneously This diversification of funds benefits the further development of the company’s business while preserving the risk of default.
Businesses with low risk tolerance often build their companies from the capital they have collected themselves first. When the company started to grow They will seek loans or capital from investors. On the other hand, business people with higher risk tolerance tend to seek credit or investment first. and then use personal funds if necessary.
It’s not like a bank that lends money and lets go. Private investors are individuals or institutions that can actively participate in the management of the company. The level of this activity varies. From giving opinions or input to GMS or even being your consultant.
This is what you generally get if you get funding from the company. capital groupParticipate in the startup incubation program Or get funding from other older startups. They often share with you the advantages and disadvantages of building a company. This experience is invaluable as a lesson for new companies.
gathering to livelihood That is an expression that many Indonesians understand today. This expression is unfounded, because with goodwill you create harmonious relations between people.
In other words, it is to build friendships with investors. You may be introduced to other investors. who are interested in your company or more or less interested in sharing their experience with you. This type of connection is what new entrepreneurs need.
6. It’s a special sales force for the company.
Have you ever seen an ad for a start-up that says, Is it a “startup company that receives investment from Venture Capital A”? In fact, getting funding from investors In particular, venture capital firms will increase the company’s sales value to more or less in the eyes of the stakeholders (employees, the public and potential buyers).
This is due to the assumption that in order to get venture capital from Venture Capital, startups must, of course, go through a difficult selection process. So whoever can manage is a good startup company. for prospective employees This also means that there is a possibility if the company can pay them a commensurate value.
One of the advantages of looking for investors through IPO Mechanism It increases the awareness of the company’s brand in the public eye. Because usually news about IPO is widely publicized. Whether it’s intensive reporting through online or offline media. Or just list it on the e-IPO page.
7. Get Motivation and Morale
as mentioned above Investors can also be advisors for you. Especially if the investor is an experienced person in his field. And you can build a good relationship with him. You can find investors like this. Not only from participating in incubators or from VC companies.
An investor who can provide you with motivation, morale and as your mentor. It could be your boss or co-worker at an old company that don’t just contribute money to business success. It also provides you with experience and emotional support.
Yes, mentoring like this is not only received by people who want to build tech startups. But it can also be obtained from anyone who wants to build any business.
There are many benefits to building a company by attracting a large number of investors. But the challenge is huge, too. First, you need to be able to convince investors that your business will be profitable. Second, if they are willing to fund your company. whether you like it or not You have to establish good communication with them.
The third challenge is that investors often want profits despite their high tolerance. This is a challenge as your company must be profitable. as well as being an honest company
Please wait 180 seconds or 3 minutes, the secret code will immediately appear under the countdown