One of the first questions that entrepreneurs ask when they decide to launch a business is: where am I going to find the money to do this?
Sparkyard has the answer for you. Meet the Capital Growth Circuit. We developed this tool to help entrepreneurs answer this question no matter what stage their company is. Whether it’s an idea on the back of a napkin or an established company generating revenue, there are always sources of capital to help you get to the next level.
The structure may look familiar to people who are acquainted with our original Growth Circuit that charts the entrepreneurial journey from idea to maturity. We intentionally kept the structure exactly the same but instead of listing the milestones businesses reach as they grow, this map focuses specifically on the types of capital available at each stage of growth.
How to Use the Capital Growth Circuit
Begin by identifying the type of company you have or want to launch on the left side of the circuit where you’ll find the different company types and definitions: microenterprise (red), Main Street (orange), innovation (lime green), and second-stage companies (blue).
Once you’ve determined your company type and corresponding color, begin at the green Start button and follow your line until you identify what Stage your company is, then scan each Step to see the different types of capital within each Stage. If a dot appears on your line at a specific step, it means that type of capital is available for your business type. For example, all the capital types are available for all four company types in Stage1 (Idea | Inception), but as you move further into Stage 2 (Launch) and beyond, not all capital is relevant for each business type. A local restaurant is not likely to need venture capital funding, for example, while a high-growth innovative business is not likely to access funds from an alternative lender.
At each of the Stages you’ll see capital designations along with dollar amounts that describe the range of funding sought at each Stage. For example, Stage 2 is Launch where entrepreneurs may be seeking the first sources of outside capital between $50k – $250k. This is often referred to as a ‘seed round’ where founders refine the product and launch into the market. Note that the financial values associated with each of the Stages are approximate and not set in stone. For example, you may raise a seed round for more than $250k.
- Remember not to skip steps when seeking funds. It is important to utilize the types of capital that are appropriate to your stage of development. If you are in Stage 1 with a barely developed idea, this is not the time to build a glitzy pitch deck and try to woo venture capitalists. This would be a waste of time both for you and for them.
- Pay attention to the types of capital that are relevant to your company type: if you are launching a microenterprise or Main Street business, you probably will not be speaking to anyone who provides equity investments. Likewise, if you’re running a well-established second-stage company, you will probably not qualify for grants or pitch competitions.
- If you are in Stage 1, pay special attention to the first three steps: personal savings, business credit cards and friends, family, fools (also known as the 3Fs). The use of these capital types is referred to as bootstrapping. Whether you are seeking debt financing or equity investments in the future, you will need to show that you believed in your idea enough to invest your own money (or the money of people close to you) to get it off the ground. This is not the time to bring in professional equity investors.
- Don’t give up equity if you don’t have to. Bringing on outside investors presents numerous potential risks and rewards, and trading equity (ownership in your company) for capital may not be the best option for your company. In some cases, taking out a loan may be a better alternative. Sparkyard is here to connect you to experts that can help you make this decision.
- Related to the point above, the simplest way to grow your business without giving up equity or taking on debt is to “cash flow” your business, meaning you generate revenue through sales and plow back (reinvest) profits back into the business to fund operations or the next round of growth. This is feasible starting at Stage 2 and onwards. This may not be feasible for high-growth companies that need a significant amount of capital to grow (like tech or biotech companies).
Get Connected to Resources
- Now that you’ve identified some types of available capital, head over to Sparkyard’s Resource Navigator to browse our network of over 60 resource partners to access the funds you need.
- You should also check out our newly created Interactive Growth Circuit that will help you determine your company type plus the Stage and Step and then it will automatically list the resources available. From there it’s a quick click to get connected to relevant resources.
- If you’d like more personalized assistance, request a customized Spark Plan to get a list of resources and other helpful tips. This is a free service, and we provide results in a few days.
- Download your own version of the Capital Growth Circuit for quick reference. While you’re at it, download a copy of our original Growth Circuit if you don’t already have one.
Launching a company is one of the hardest things a person can do. Accessing the right capital at the right time is a major source of stress and confusion for many entrepreneurs. Sparkyard’s Capital Growth Circuit demystifies the process and helps you clearly see the funding opportunities available at every stage of your company’s growth.