Do you have millions of ideas in your mind and would like to implement? Do you lack the money you need to start your dream idea?

 

Many start-up ideas require an amount of money to get started.  Yet, where can we get our money? I was speaking at an undergraduate class at Asia and the students gave me these responses:

 

I can borrow money from the bank! I will go and approach the Venture Capitalists I will ask my uncle to invest

 

I then quickly respond to their ideas one by one. 

I told the first guy who suggested that we go to the bank that unless he is willing to put his house on mortgage, he won’t be able to get the funding for sure. And, if you put your house on mortgage, this basically means that it is not your business plan that assists you to finance but your house.  Of course, if you are the son of a VIP of a country or the son of the Chairman of HSBC, you can probably borrow some money from the bank.

 

For the second guy who told me to approach Venture Capitalists, here’s my response: it is feasible but tough! Majority of Venture Capitalists do not invest in start-ups.  It is a myth and misunderstanding! Venture Capitalists usually invest in businesses that have already proved that their business models are feasible and have constant cash flow and growth track record.  Even if the Venture Capitalists are investing in start-ups, here are the things that you probably need to have:

 

Patent of a technology Good track record of starting up a business and bring it to IPO At least 10 times return in 3 to 5 years time depending on the year of the Venture Capitalist fund You business requires at least 1 million USD to burn in a very short period of time

 

What about my response to the guy who is going to ask his uncle? I will say he is the most realistic guy.  A new business is usually supported by the 3Fs:

 

Family Friends Fools

 

They are the people who are most willing to support you.  They invest often not because of the idea but you. They believe in YOU! For this group of investors, you don’t even need a sophisticated business plan but a PowerPoint presentation or even a piece of paper outlining your idea, marketing strategies, potential return and most importantly your DREAM.

 

Other than these people you can go and seek for capitals.  There are two other places you can easily get money from:

Your customers: You can simply draft a prototype, put up a website and print some business cards and start pitching your customers.  If they are willing to prepay, get the money and work things out.  Many contractors are using this model to start off their projects continously. Your Suppliers: Many product manufacturers or service providers are lacking sales channels.  If they are willing to help them create some sales channels, they are usually willing to give you some money to get the project going.

Finally, remember to always try to minimize the money you need and work out leverage strategies to lower your start-up cost at the beginning.  Think twice about the cost built in your business plan.  May be you will be able to eliminate them all and at the end of the day, do not need external investors to bring your business to live!