Bryan Santone, H Two Consulting Inc., Toronto, ON
A recent post on the Canadian Youth Business Foundation (CYBF)’s Entrepeer Hub Linkedin group read “Why is it so hard to start a business. How am I supposed to make money from nothing?” Unfortunately, for many entrepreneurs, accessing capital to establish or grow their businesses has become a challenge. Here are some of the reasons why:
- Canadian banks typically will not lend without company history and / or collateral;
- Microloans or other credit products may be available, but have high interest rates;
- The Canadian venture capital (VC) market has shrunk by 80% over the past ten years to $1.1 billion; and
- VCs and other investment vehicles require start-ups and early stage companies to surrender significant equity in return for capital.
Despite this gloomy picture, there are a number of ways for entrepreneurs to access financing. Here are some starting points:
- CYBF’s Expansion Program for existing CYBF entrepreneurs to grow and expand their business;
- The National Angel Capital Association provides referrals and services for entrepreneurs looking to grow their business;
- Many universities across Canada have established incubators to support innovation and commercialization of technology;
- The micro-VC market emerged as a viable source for less capital intensive start-ups; and
- Leveraging your personal network for seed funding in your new venture (establishing repayment or equity terms).
Finally, getting access to capital requires a clear value proposition for potential investors and future partners. A couple of good books to help you refine your investor pitch include The Art of the Start by Guy Kawasaki and Purple Cow by Seth Godain.