What is one way to get funded as a start-up?
To help start-up owners get their projects funded, we asked business owners and investors this question for their best suggestions. From crowdfunding to generating user donations, there are several tips that may help you fund your start-up to scale your business and reach new goals.
Here are 10 pieces of advice for funding a start-up:
- Seek Specific Funding
- Know Your Price
- Establish Key Partnerships
- Join a Business Accelerator
- Look Into Crowdfunding
- Save for Self-Funding
- Build a Customer Base
- Reach Out to Your Network
- Go to the Bank
- Get User Donations
Seek Specific Funding
When researching the right path for getting funding for your start-up, consider seeking out sector-specific funding that is relevant to your business. Many lenders in the industry specialize in funding specific sectors in order to offer maximized support. Here at AVANA Capital, we actually specialize in the Renewable Energy sector. Our renewable energy lending products include pre-development, development, equipment, construction, and mini-perm financing, as well as distressed debt acquisition. — Allan J. Switalski, AVANA Capital
Know your Price
Funding is an incredibly important yet challenging part of being a founder. We mostly self-funded Kegelbell’s $160,000 that got us to market, including product testing, mold building, and FDA registration. Shortly thereafter, we took a few smaller investments as convertible notes that helped get us to where we are now. Today, we’re in the process of fundraising a larger amount that will help take Kegelbell to the next level. All that to say, I’ve run the spectrum in the world of start-up finances, and one thing I’ll definitely note is that you need to know your “ask.” Prepare and practice ahead of time and always have a success-oriented mindset. — Stephanie Schull, Kegelbell
Establish Key Partnerships
Get funding for your business through strategic partnerships. Especially for business owners with limited experience within the industry, particularly manufacturing-related industries, it makes sense to develop strategic partnerships with the best manufacturing and distribution companies to help secure the success of your business venture. With some stake in the game, these strategic partnerships are almost certain to win out when compared to other approaches. While not related to funding, in digital PR, we rely heavily on strategic partners to help grow companys’ online footprints. — Rronniba Pemberton, Markitors
Join a Business Accelerator
A great way to get funding for your start-up, especially if it’s a tech-heavy business, is to try a business accelerator or incubator. These are located across the country, mainly near colleges with business programs.
Business accelerators and incubators are spaces with part communal workspace and part mentorship development centers. Here you can partner with amazing people and get off the ground. — Tri Nguyen, Network Capital
Look into Crowdfunding
Getting a start-up off the ground can be stressful, especially when you’re broke. A really smart and inexpensive way to get a start-up funded is crowdfunding. This is done by raising small amounts of money from a large number of people. If you were to get 100 people to donate $5 each, that’s $500. So think of reaching 1,000 people and asking them to donate. This method really starts to add up. –– Brandon Brown, Grin
Save for Self-Funding
The age-old practice of bootstrapping is always a great option for funding a start-up. This is where you fund your start-up using your own funds, either from personal savings or low- to no- interest credit cards. It’s great because you are not indebted to friends and family or loan sharks. Just make sure you have a solid business plan that’s completely fleshed out. — Ajay Mehta, Birthdate Co.
Build a Customer Base
When you’re trying to obtain funding for your start-up, the factor of a successful sales model will come into play. Many investors will want to see sales before they get involved in investing in a start-up. They want to see that this company can function and has a demand before they will feel comfortable pouring money into it. The ability to receive orders and fulfill them shows that you’re an established company with a customer base. Knowing this makes you a safer bet for a potential investor as they can simply try to expand your operation instead of funding it into existence. — Mark Smith, University of Advancing Technology
Reach out to your Network
A classic way to get funding for a start-up is by borrowing money from friends and family. Convincing banks that your idea is a sure-fire success can be a daunting and difficult task. Friends and family tend to believe in your dream and want to help make it come true. Be sure that both sides get sound legal advice before exchanging any funds, especially if the money is a loan. — Alex Czarnecki, Cottage
Barter Services with other Start-Ups
Try working with communities of startups and trade equity or services. It’s not traditional funding, but it works well when you’re just getting started. For example, you can barter with an eager and talented college student for some web design. In exchange, they get the experience of working with a client and a recommendation down the road. –John Levisay, The Pro’s Closet
Go to the Bank
This may sound crazy, but some start-ups can avoid giving up equity and control over their future by pursuing a traditional bank loan. While VCs can often help open doors and provide value beyond the dollars they give you, startup founders should remember it’s not the only way to go. If you’re bootstrapped and profitable, go talk to a local bank. They only care about being repaid, not earning 10X multiples, so they’ll be a less demanding and less involved business partner. — Elliot Brown, OnPay Payroll
Get User Donations
Yes, VCs and angel investors are great as you can get a great deal of funding — but often — you end up giving away control of your own company. Our company started as a little start-up that accepted coffee donations back in the day — and the user got to decide how much to give. It averaged around three dollars per donation and really helped our site take off. As soon as we could operate the site independently, we removed the donation option. And eight years later, we’re now in the top 200 most visited sites in the world (according to Alexa) and still offer a freemium product to 40+ happy monthly users. — Hung Nguyen, Smallpdf
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