7 Unique Ways to Fund Your Startup
Starting your own business from scratch can be a difficult feat, especially if you don’t have the funds to back it up. You can always try to get your funding through venture capitalists or an angel investor, but these types of funding can be difficult to come by and might take years before you see any kind of returns on your investment. Luckily, there are many other ways that you can obtain startup capital without having to jump through hoops like these, even if you don’t have any experience doing so already.
1) Work While You Wait
If you need money but don’t have an existing business or assets, consider starting a part-time consulting business. You can do so by working as a consultant for hire (i.e., a temp) for other businesses that need work done on an interim basis. Doing so will allow you to bring in extra income while also building up your own portfolio of clients and projects—which may lead to opportunities for full-time work down the road. Just make sure you register with a reputable company that will vet your background and experience before signing on with them—there are plenty of consulting companies out there who are actually headhunters looking for permanent employees rather than legitimate contractors. And remember, being a contractor doesn’t mean you won’t be eligible for benefits like health insurance; it just means you might not get them from your employer.
2) Crowdfunding
The popularity of crowdfunding shows no signs of slowing down. With platforms like Kickstarter and Indiegogo, it’s easier than ever for startups to raise funding from their audience. In exchange for your support, you can receive early access to a product or other perks. If you don’t have a large network of friends and family who are willing to invest in your idea, consider using one of these sites as an alternative source of startup capital. You never know what might happen! And, with campaigns that have raised millions of dollars and even spawned successful companies (like Pebble Technology), there’s plenty of proof that crowdfunding works.
The downside? While many campaigns do end up raising money successfully, not all projects meet their goals—so be prepared if you fail to reach yours.
3) Grants and Scholarships
While they’re not as common as they once were, scholarships and grants still exist, and some of them can provide enough funding for you to get your idea off the ground. Grants require a strong research and business plan—and lots of competition—but many are free or relatively easy to get. A good place to start is with government-sponsored programs like Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR). For more information on these programs, check out SBA.gov/grants . There are also organizations that offer specialized grants; if you have an environmentally friendly product, for example, look into The Environmental Protection Agency’s Small Business Innovative Research Program. If you have a medical background, apply to NIH Small Business Innovation Research Award Programs . And if your startup will serve low-income communities or people in need, look into federal grant opportunities through organizations like Health Resources and Services Administration (HRSA), Department of Education , and U.S.
4) Entrepreneur Loans
Entrepreneur loans are a type of business loan that entrepreneurs get from banks. But what is an entrepreneur loan? An entrepreneur loan is a loan that’s aimed at helping business owners start, finance and maintain their businesses. Like other small business loans, entrepreneur loans are intended for growing businesses with good prospects of creating jobs and increasing tax revenues in their communities. However, unlike many other types of business loans, these loans are geared toward established companies with proven track records. Businesses can apply for entrepreneur loans when they have been operating for at least two years and have annual sales revenue of $1 million or more. Although there are no fixed rules about how much money you can borrow through an entrepreneur loan program, your lender will likely look closely at your personal credit history as well as your company’s cash flow statements before deciding whether or not to lend you money.
5) Angel Investors
An angel investor is a wealthy individual who provides capital for a business start-up, in exchange for convertible debt or ownership equity. Angel investors, typically high net worth individuals, are often former entrepreneurs themselves and are able to provide valuable insight on how best to manage a business from both strategic and operational perspectives. Angels will typically invest anywhere from $50,000-$250,000 per deal with no minimum investment per round. These seed stage investors look for opportunities with huge growth potential and bring years of experience in their respective industries. It’s important to note that most angels won’t touch your company until you have already raised at least $1 million in funding, making them an option that is more accessible for later-stage companies.
6) Venture Capitalists
While it might be difficult for startups to secure funding from VCs, these investors can become invaluable resources—not only financially, but with connections, feedback and market intelligence. The best thing a startup can do is approach a VC in an honest way and go through their application process. It could mean everything or nothing—so don’t make too much of it either way. At least you got your foot in the door!
7) Bootstrapping
This means doing whatever you can with your own resources to start a business. Obviously, bootstrapping has its limits, so it’s better for companies that aren’t capital-intensive (i.e., technology and service businesses). Bootstrapping could include: working on your idea while you still have a job, taking money out of savings, borrowing from friends and family or maxing out credit cards. If you do use debt, make sure you pay yourself back first. It’s also important to be aware of how much time you’re spending on your startup versus earning an income—you don’t want to burn through all your savings! Be smart about how much risk is involved in what you are trying to do. You might want to consider starting a side business before diving into something full time.
