Often, they start companies by bootstrapping – meaning they fund their initial operational cost out of their own pocket – but that often isn’t enough as operations grow more complex and start-up costs balloon before revenue streams in.External sources can offer a much larger capital base for entrepreneurs anticipating the need for bigger pots of funding, as their businesses scale up.
But there are strong reasons for ambitious entrepreneurs looking to expand their businesses rapidly to consider adopting a different mode of funding: Equity investments.THE GOVERNMENT IS CO-INVESTING I often encourage aspiring entrepreneurs and my students at NUS Enterprise to seek additional funding from institutional investors - whether venture capital firms after a company has had proof of value or angel investors at an earlier stage as the company continues to develop its business model - and not to rely solely on grants and business plan competition prizes.
In contrast, bringing on board equity funding helps businesses enlist a whole host of other resources to scale up. Where the goal of most equity investors is to see returns on their investments, companies they back can look forward to a huge amassing of resources to do just that. ShopBack, a start-up providing cashback reward for online shopping – has a team of 150, over 5 million monthly users across desktop and mobile across seven markets in the Asia Pacific including Malaysia, Thailand and Australia.
The venture capital world pays close attention to which start-ups get investments from the who's who of the investment world - especially Softbank, Sequoia, Monk’s Hill Ventures, Gobi Partners and East Ventures, just to name a few. Other companies would also be more open to partnering start-ups backed by these players.