It can be really exciting to start a business of your own. Coming up with your own ideas, calling the shots, being your own boss!
And then comes the business planning – how do you get funds for your new startup?
Now, before you give up on your business idea and think that there’s no point in pursuing it, consider the options you have.
Contrary to what you may be thinking, startup funding in Malaysia is not such a complicated process. All you need to do is find the right funding sources for your business in Malaysia and approach them the right way.
In this post, we will discuss the different ways you can get funding for your business and be successful.
The most common source of funding for businesses in Malaysia is Government loans. One of the reasons government loans are so popular could be because they don’t involve andy processing fees and there are no profit rates.
Also, the government has been trying to encourage entrepreneurship in Malaysia, making the country a very suitable place for entrepreneurs. It’s the best place to be if you’re a budding entrepreneur!
Government funds are also in accordance with the ninth strategic challenge under Tun Mahathir’s Vision 2020. It aims to create a very competitive and sustainable economy in the society.
Here are some of the Government funds:
Yayasan Penjaja dan Peniaga Kecil 1Malaysia
Skim Pembangunan Francais
Cradle Fund Sdn Bhd
Crowdfunding is obtained by getting the financial support of people who strongly believe in your cause. They are your business’ well-wishers, who want to see your business and your product/ services succeed.
The good thing about crowdfunding is that the people are free to give in how much they can or choose to, without any pressure. And since the people supporting you firmly believe in your cause and your business, you already have raving fans waiting to help you promote your business!
If you do end up choosing crowdfunding as your funding source, do check out these popular crowdfunding platforms in Malaysia:
Angel investors are a dream come true for any new startup. Angel investors, in simple terms, are investors who believe in the future of the startup they are going to invest in. It could also be that angel investors strongly believe in the new company’s cause, or services, or products.
Getting an angel investor to invest in your business is almost a sure shot sign that your business is on the right track.
An angel investor also has the huge added advantage of getting the guidance and expertise of the angel investors, who would do all they can to see your business succeed.
This is because angel investors also get an agreement when it comes to sharing the profits of your business. It is kind of a win-win situation.
These are a few angel investor platforms you can look into:
Angel Investment Network
Partnering with a venture capitalist can also be a great idea if you are looking for a funding source. They would act as a partial owner in your business, but all the decision making would still be up to you.
However, sometimes, venture capitalists ask for a bigger share of the company, especially if they have contributed most of your funds. This may not be a bad thing for your business, as the finances will be run by them majorly, and you can focus on other things.
Some venture capitalists you could approach for funding are:
The next way to get funding that we’re going to discuss is doing it yourself. By carefully calculating your savings, living frugally, and making some other important lifestyle changes you can surely fund your business yourself.
However, always remember to have a plan B, factor in unforeseen expenses and be prepared for emergencies.
Self-funding may not be always a good option, so keep that as your last resort. It is not easy to manage finances when you are just starting out, which is why it is recommended that you try out other funding sources.
One of the more common ways of securing funding for your business is by obtaining a loan from a bank. But although this is a popular method, it is sometimes very hard for new entrepreneurs to get cleared for a bank loan for their business.
Usually, a bank will try to assess your bank statements and credit history before offering you a loan for your business.
If however, you do happen to pass their evaluation, a bank loan will be granted to you. This is one of the best methods of getting funding for your business.
Tips To Help Optimize Your Funding Strategy
There are a few things a good CEO must focus on while building a new company. Building a great product, hiring a capable team, increasing sales, and providing excellent customer service are high up on the list, but so is one more thing: raising funds.
Earlier in the post, we were discussing where you can go to obtain funding for your startup. In this section, we are going to discuss how to build your funding strategy and optimize it.
It is therefore important that the CEO understands when cash is running out, what milestones need to be reached before getting to a higher valuation, and creating the right plan to achieve those milestones.
Value your startup correctly
Unlike what most newbie entrepreneurs may think, startups valuations do not increase linearly with time. Startup valuations are usually done based on risk and rewards. As the risk decreases or the rewards increase, the valuation of the company increases.
This does not happen linearly, but generally in big chunks when the business reaches certain milestones. Som important milestones are customer traction, hiring a good managerial team, or when a monetization strategy for an online business starts to bring in more returns.
Identify And Calculate Your Risks
When you’re just starting out as an entrepreneur, your new company will have risks that are very different from those of other companies.
For instance, if you own a product company, your risk lies in the technology and usefulness of your product. If you have a strong business founder, your valuation will increase by the team your founder hires, who will be able to do a remarkable job with your software or other product.
Other challenges that increase your risk are a competitive marketplace, an inexperienced team, etc.
Try To Mitigate Your Risks
Before you approach an investor, it would help if you could try and reduce your risks as much as possible. This would increase your chances of success and allow you to get a higher valuation for your company.
Try getting some customer traction so that you can de-risk your startup and increase your valuation. You could do this by offering beta versions to customers or even by developing a free version of your product so that you can test customer engagement.
Funding your startup is no walk in the park, but it’s definitely possible if you reach out to the right people and optimize your funding strategy.