Finance the start-up through business angels

But how can we finance the growth? The cashflow from existing activities is not always enough...

The entrepreneur needs significant financial resources at certain key moments of his development.

Depending on the stage of development, the required means and level of risk vary. At each stage, different sources of financing can be mobilized. Here, we turn to "Business Angels" who know how to take risks.

The Baker convinces the Business Angels to finance his enterprise: he opens 100 shops.

  1. The Business Angels are the first investors

    Transformation requires an investment expense that will only bear fruit several years down the line.
    Before benefiting from the results, the Model must be built, tested, prototyped, the Enterprise must have premises or legal advice and the initial Resources must be in place. The Enterprise is looking for start-up financing.

    Starting an enterprise therefore requires a risky investment. The Shareholder is the one who invests and takes this risk because he/she thinks that the project can succeed. The Shareholder's objective is that the enterprise succeeds in turning a profit over the long term.

    We generally start with "love money": close family and friends give small sums of money to the Entrepreneur to encourage him/her. But it is generally insufficient: we have to turn to  "Business Angels". They are individuals, often former entrepreneurs who have sold their enterprise, who know how to take important risks, who are really taken with a project and who finance start-ups, using their personal fortune, at the most uncertain time. It is extremely difficult to write a credible business plan at the start up of an enterprise. 

    Their criteria are less based on these business plans than on the confidence they place in a team or an idea. They not only bring money, but also operational support and a network of contacts.
  2. "Crowdfunding" enables individuals to participate in start-ups

    "Crowdfunding" is a means of financing young entrepreneurial start-ups through individuals who invest modest funds via participative platforms on the Internet.
    It is a fast way of locating financing; it is also a way of testing the market's interest in the product and to increase visibility.

    See "les Echos" (5/11/2013): Les start-ups americaines vont pouvoir se passer des banques pour se financer (American start-ups will be able to bypass banks for financing)

    With no hope of getting a loan from their banker, American start-ups may soon be able to turn to any American to finance their projects. In the coming weeks, they will be able to sell part of their capital on the participative financial platforms found on the Internet. Start-ups will be able to raise up to 1 million dollars on the Web and approach non-accredited investors. "We want this market to prosper, while protecting the investors", emphasized Mary-Jo White, who presides over the regulatory body of the Stock Exchange. Enterprises can present their projects on the Internet portals and, in this way, convince individuals to enter into their capital. "This should enable the financial participative platforms to enter into a whole new era", commented Slave Rubin, CEO of Indiegogo, a platform created in San Francisco five years ago. The formalities to fulfill will be far lighter than those required to be listed on the Stock Exchange. Only those Enterprises raising more than 500,000 dollars will have to have their financial accounts audited. The others will be able to simply present their financial status once a year. Participative financing comes in several forms: some Internet sites offer money in the form of loans. The Lending Club is the most important one: it has enabled individuals to borrow around 2 billion dollars this year and posted revenues of 100 million. The second player, Prosper, is five times smaller. Other sites enable enterprises to obtain donations and to thank donors by distributing presents (T-shirts, watches, video games, etc.).

    See (in French) the file compiled by Croissance Plus.
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