What source of funding suits your business best?

In true spirit of #CapeMarketing, Jeremy, the owner and venue host for Cape Town’s CBD GrowthXchange meetup group shared from his own experience some insights and info you won’t get from Google.

Opening with an empathetic approach to include all small business owners, startups and entrepreneurs attending the session, Jeremy shared with the group the reality that only a few will succeed – the few that do some additional homework into possible funding and who actually go the extra mile to get it.

As he sees it, there are 5 umbrella models for funding, with which he added some personal challenges he has discovered from experience. The attributes and advantages are easily findable online, while these pitfalls and challenges are not often shared. Take the following as insight to learn from:

Types of funding & factors to be wary of:

  1. Bootstrapping – Starting/running a business without external help, funded by your own personal resources. This is a high personal risk although brave and admirable. Often times your family applauds you at first though after some time they begin to share concerns with your expenditures or social habits, which adds unnecessary stress and doubt to your activities and mindset. The loss or low cash-flow does become demotivating and often egos get in the way of sound business logic and motivation.
  1. Friend & family funding – Since before 200BC small businesses have been supported and funded by family and friends. As our culture becomes more individualistic and isolated, friends and family are hardly our closest bet for funding. While it is positive to have family and friends invest in you as a person they believe to make a success out of your venture, the potential stress of disappointment is ever present. A nifty piece of advice that received many nods around the table was that clear expectations need to be set for the funding members, or else feuds and un-pleasantries could arise within friendships and relationships.
  1. Crowdfunding – This is a tool to generate ‘small’ money from a large pool of people. While it does depend on a ‘cool factor’ often, Crowdfunding has seen many startups, campaigns and small businesses given a new breath of life. Businesses often see this funding structure as a predominantly Tech-heavy platform that is challenging to enter. SA businesses like Thundafund and Kickstarter have however made the Crowdfunding platform more accessible. Check out the NEW little brother to Thundafund called Ripple – a crowd funding site for causes and activism.
  1. Angel funding – Jeremy explains this funding structure as tapping in to the funds of high net worth individuals with high liquidity (aka the rich boys). These are people who represent or own mature business models or are established as individuals in their sector, with an interest in supporting growing businesses in realms they feel strongly about. Marc Shuttleworth would be a good example here. A positive side to this source is that the individual often becomes involved as a mentor to your venture, hence the ‘Angel’ terminology. Watch that space however – often these Angels become the devil in disguise and have other plans for your business and may try reach in for more executive power than you were willing to allow.
  1. Venture Capital & Investment – This is playing with the big boys. VC or investment funding is joining up with individual or companies who have a mandate of investing in long term return opportunities. Hence the equity that they require in return for their funding. Should you opt n for this sort of funding or let’s say investment from your own bank ie: bank loans, the longer term repercussions of interest rates and payback installments may be the death of you or a profit eating situation.

[ File # csp7718912, License # 1924971 ] Licensed through http://www.canstockphoto.com in accordance with the End User License Agreement (http://www.canstockphoto.com/legal.php) (c) Can Stock Photo Inc. / focalpoint
[ File # csp7718912, License # 1924971 ]
Licensed through http://www.canstockphoto.com in accordance with the End User License Agreement (http://www.canstockphoto.com/legal.php)
(c) Can Stock Photo Inc. / focalpoint
Lessons from Jeremy

  • Funding will take longer than you anticipate – bargain on 6 to 18 months
  • Funnel your approach Smart and not Hard – it leads to a better conversion rate
  • Take risks and don’t be afraid to move your target amount up – what do you have to lose?

What give Jeremy clout as a Small Business Owner and Advisor to #CapeMarketing Mini Masterclasses?

Jeremy has been involved in various funding projects involving varying funding models and in different spheres of business.  1) Corporate multi-million funding drive using Venture Capital funding; 2) Multi-million non-profit funding drive using an Angel Investment model and 3) A small business funding model using a Bootstrapping / Friends&Family funding model.

Jeremy, Gerald and Nicolette jointly own and operate Issi on Bree. They chose starting this venture above MBA studies with the desire of creating a social institution in Bree Street focused on 1) incredible internet connection 2) perfectly brewed coffee 3) stimulating conversation 4) transfer of knowledge & books.

But wait there’s a bit more…

While getting Issi off the ground Jeremy and consults on various business and social projects. Immediately prior Jeremy chaired Brightest Young Minds NPO, set up the T-Systems (Deutsche Telekom Group) office in Nairobi, Kenya where he also lectured Roman Law at Strathmore University.

Jeremy is an admitted advocate of the High Court of South Africa and holds bachelor degrees in Commerce (Pret.) and Law (Pret.) as well as a Master’s degree in International Trade Law (Stell). He is currently a Fellow of the Public Leadership Forum LeadershipINDABA at Stellenbosch University’s School of Public Leadership.

 Submitted by Lea Smit of #CapeMarketing