Established entrepreneurs often have vast networks and access to investor connections to help them raise money and hit the ground running. This comes in handy when it’s time to get a startup off the ground and can provide a channel for the company that builds funds quickly. However, what if you are a first timer or if you don’t have that pre-established network? How do you start a business with minimal funding? In this short article we explore four lesser known ways to raise money for your startup.
Such a simple solution they are often overlooked, incubators exist with the sole purpose of helping businesses get on their feet. Some incubators work with all startups, while others may focus on a specific industry like science, technology, or student business. In addition to networking opportunities they also offer advice, professional resources, and funds they contribute. They can usually assist in finding grants or additional investors as well depending on the business and industry. Because business incubators specialize in startups, they have noticed trends in which industries are best and the qualities that make a business succeed. Incubators can be extremely beneficial and offer valuable insight during the planning and initial growth phases of a business that could be the difference between success or disappointment.
Crowdfunding works by allowing the public to invest in your business. The idea is that large quantities of people are able to invest in ideas they believe in, and you usually end up with a few passionate, large buy-ins, and a large quantity of smaller buy-ins, resulting in some sizeable for your business. It is most popular for new products and technology, but it can be useful far beyond these categories. If you can establish a strong brand for your startup prior to launch and create a storyline that feels personal to customers and solves a pain point for them, a crowdfunding campaign could show significant results for you. Kickstarter and Indiegogo are veterans of the industry and were some of the first to launch the online crowdfunding business, but there are a variety of sites that now offer the chance to raise funds via crowdfunding; some focus on specific industries and characteristics, while others are open to anyone.
If your business is already centered around a service, that’s great news. Set out to find some customers to raise funds. By requiring a certain amount up front from customers (prior to performing the service) you will increase funds for your business, and the more quickly you are able to complete the job the sooner you will have the rest of the capital.
If your business is product based, find a way to add in a service so you can fund your products. The key to this is approaching the right customer, a customer with a large pain point that you can solve, in your industry. This way, you are growing your business and also receiving funds while you work toward the final product.
Loans can be a simple option for those of you with a strong business plan and the statistics and projections to back it up. Banks are the most common source of loans, although you can often find a variety of grants and business loans through other resources as well. The one thing they all have in common is that if you want the loan, you have to prove your business is worthy and has high likelihood of succeeding so you can pay back the money over time. Meticulous planning and a strong, honest presentation of your business projections will be needed if you select this method for funds.