Did you know that in Colombia 75 out of every 100 start-ups fail in their first three years? And of those that survive, barely one manages to consolidate in the long term due to lack of sources of financing for entrepreneurship.
You must be clear that launching a business is not just about having a good idea: you also need to know how to finance it from the beginning.
That's why today we present 5 sources of financing for entrepreneurship and how to make winning proposals for each one.
Seed capital funds
These are financing programs (public or private) that offer resources to early stage ventures.
When to use it?
When you have already validated your business model and need to hire a team to better develop your product or service.
How to make a proposal?
Create a pitch that explains:
- The problem you are looking to solve.
- Your solution (product or service).
- How you will use the money invested.
- The expected impact.
- Why your equipment is ideal to run it
Where to start?
You can access calls for:
- Fondo Emprender del SENA or RECON Colombia if you are starting with your business idea.
- Social Skin, Innpulsa, Reforestamos, Chivas or Hult Prize if you have an established business and want to continue scaling up.
Do you need to better organize the finances of your business?
Listen to Ep 13. 2 mistakes that differentiate a stable business from a failing one.
Jorge Gallego, CO of Tranqui Finanzas.
Listen to the episode
Crowdfunding
It is a way to raise funds through small contributions (crowdfunding) from many people on digital platforms such as Kickstarter or Vaki.
When to use it?
When you have an active community, an attractive product or service that you can pre-sell and signs that the market is interested in participating.
How to make a proposal?
Organize a campaign that counts:
- The history of your project.
- How much money you need and for what.
- What rewards you will offer for each contribution.
- An emotional and direct message that motivates support.
Where to start?
You can launch your own campaign at:
- Kickstarter: ideal if your project is creative, technological or innovative and you want to target an international audience.
- Indiegogo: perfect if you plan to fund product design, social causes or personal campaigns. It also accepts campaigns with or without a fixed goal.
- Vaki: for social, cultural, environmental or entrepreneurial projects and if your audience is in Colombia or Latin America.
Angel investors
These are people who invest money and contacts in projects with high potential in exchange for an equity stake.
When to use it?
When you have a business model with some traction (sales, users, growth) and you are ready to scale with strategic help.
How to make a proposal?
Create a pitch that explains:
- The problem you are looking to solve.
- Your solution (product or service).
- How you will use the money invested.
- Projected growth 1-3 years.
- Percentage of the business you are willing to give up.
- Why your team is the best bet.
Where to start?
You can search for angel investors on platforms such as:
- Angel Investor Network of the Bogota Chamber of Commerce (CCB): the largest and most active ecosystem of this type in the country.
- Colombia Investment Network (CIN): connects Colombian and foreign investors with ventures throughout the country. If you have a business model with a technological or high-impact approach, you can shine here.
Bootstrapping
It is a strategy for entrepreneurship without relying on external investors. This way, you grow your business with your own resources, income and a lot of creativity.
When to use it?
If you are at an early stage, have clarity about your value proposition and want to maintain full control without giving up equity, bootstrapping is a great option.
How to make a proposal?
The key is to keep costs down and be very strategic with every expense, so:
- Create a clear work plan to generate quick cash flow that spans 3-6 months.
- Identify your available resources (money, time, contacts, skills) and define how you will use them to sell.
- Prioritizes revenue over mass growth.
- Define a tight budget, cost-effective sales channels and measurable objectives.
Where to start?
You can validate your work plan with it:
- Track your sales.
- Access to free digital tools or channels that allow you to scale without getting into debt.
- Strengthening your strategic allies to leverage your business idea.
Venture capital
It is a form of financing where investors bet on startups with high growth potential in exchange for a stake in the company.
When to use it?
When you have validated your business model, you have traction (sales, users, community) and you need resources to scale fast and conquer new markets.
How to make a proposal?
Prepare a clear pitch that includes:
- The problem you are looking to solve.
- Your solution (product or service).
- How you will use the money invested.
- Projected growth 1-3 years.
- Percentage of the business you are willing to give up.
- Why your team is the best bet.
Where to start?
You can participate in calls for proposals in funds or accelerators such as:
- Rockstart Latam: international accelerator based in Bogota. Invests in early stage startups, especially in Foodtech, Healthtech and Climate. Provides capital, mentoring and access to global network.
- Mountain Partners Colombia: Swiss fund with operations in Latin America. Invests in scalable technology startups, with a strong focus on digitalization. Accompanies with capital, strategy and international connections.
- InQlab: Colombian fund with corporate backing (Grupo Bolivar). Supports ventures in fintech, insuretech, edtech, health and more. Combines investment, incubation and scaling.
- The Venture City: international fund with presence in Miami, Madrid and Bogota. Invest in stages pre-seed y seedand support them with data-driven growth.
Factoring
It consists of the sale of invoices receivable to a financial institution that advances the money.
When to use it?
When you are already selling to companies, you have 30 or 60 day payments and you need immediate liquidity without going into debt.
How to make a proposal?
Prepare an application that includes:
- Detailed information of the invoices you wish to negotiate (amounts, terms and customers).
- How you will use the money invested.
- Why you are a reliable factoring client.
Where to start?
You can factor with entities such as:
- Banco de Bogotá: they have national and international factoring products. Ideal if you sell to large companies.
- Davivienda: offers electronic factoring for clients who already have a business relationship with them.
- Bancóldex: specialized in supporting MSMEs. Offers factoring through financial partners.
- Mesfix: 100% digital collaborative factoring platform. You can sell your invoices directly to investors.
- OmniLatam: digital factoring, easy to use, with agile analysis and less paperwork.
- Finkargo: if you import products, this platform offers financing and factoring for your international operations.
Now that you know these 5 sources of financing for entrepreneurshipEvaluate which one is best suited to your current stage. You can even combine them strategically to diversify your financing.