Few Problems Start-Ups Tend to Face

PDF Article: large-corporates-raise-the-game-companies-markets-news-top-stories-the-straits-times

Caption: Sustainability and Profitability of a Start-up.

Author: Chia Yan Min

Date: 27 December 2016

This article states a few problems that start-ups typically face. Some of the problems include having a loss in the first 9 months of the business, or even difficulty getting the fund that the business needs. As a start-up to get funding from various investors, venture capitalists or etc., a start-up has to first complete their financial projections, like their sales forecast, sales budget, profit & loss statement, etc. to convince the investors that it would be worth for them to invest in their start-up. Potential investors usually take in consideration about the scalability, sustainability and profitability of a business before they decide to invest in it. If they feel that the business has no potential to do well, they will not invest in it.

Relating it to what we learnt in this semester in this Financial Management module, we were required to show our 3 year financial projections and we had to show our sales forecast, sales budget, purchases budget, expenses, profit & loss statement, and a few others. For our sales forecast, we had to take into account about the business’s start-up and growth period & also seasonality to predict our future sales. This is so that it can clearly be seen by investors deciding whether to invest, that the company is well prepared and organized about their business. That being said, it is perfectly normal for a start-up to not make any profit in their early stages of the business as they have to cover their initial costs and break even.

Also, relating to what we did, after all the financial projections we did, we also had to fill in the raiSE template as if we were really applying for raiSE. Doing that exercise, it made me realize that different businesses have different types of fundings that they can get and a start-up has to really find the perfect one for their company. Also, while doing up the financial projections, I also noticed that a business has to know all of their costs and expenses properly from the very start of business. It is a vital process to help forecast the sales and to attract potential investors. So, start-ups have to get all their costs and stuffs clearly listed out to have an idea how their business’s finances would be for the first few months or years.

One thing a start-up has to consider is the funding for their company

PDF Article: startsg_-fintech-start-up-scheme_-applications-open-companies-markets-news-top-stories-the-straits-times

Caption: A company looking for start-ups to fund for.

Date: 3 November 2016

This article basically talks about a company, Startupbootcamp FinTech Singapore, who recently opened applications for fintech related companies to sign up for, so that they can help them in their fundings, or just help them as a start-up in general. There is also this “BigFund” which is a start-up laboratory by the Entrepreneur’s Resource Centre (ERC), which helps the start-up to commercialize across South-East Asia. This can be interpreted or seen as a ‘kick-starter’ thing.

Relating to this start-up matters in the things we learnt, in one of the e-learning weeks, we learnt about the different ways a start-up can get funding.

  1. Self-funding
  2. Friends & Family
  3. Angel Investors/Bank/Venture Capital

These are the few ways that one can get their funding as a start-up. Of course, the most common one would always be self-funding or friends & family. However, these two options can also be the more riskier ones because if your start-up fails, there will be an impact on you directly. These two options can also come under the term ‘debt financing’ which means that you borrow the money from them, thus being in debt to them. The more ideal way to get funding might be through the last option. Similar to the article above, start-ups can get their fundings through firms offering it. This comes under ‘equity financing’ which means other external people actually investing in the company.

Besides these two; debt financing and equity financing, a start-up can also get their fundings through crowdfunding. Crowdfunding is a trending way that start-ups usually gain their funds from now. However, the thing about crowdfunding is that, the idea of the business has to be new and unique so that people are attracted or can relate. Only then, people would support the project. If the business is common and not relatable, it will not be easy for one to gain funds from the crowdfunding method.

Thus, for this blog post, i have related the article to what we learnt which is the different ways a start-up can get their funding from.