Funding a Business

Funding a Business

Startups are the hardest to fund. You have no track record and no definite proof that your idea will work in the marketplace. There are a variety of methods to fund your project.


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Methods

Your Own Pocket

Your own money is the best place to look for funding. It is most likely the way you are going to have to start. This means you have to start something small enough. This is known as bootstrapping. Most businesses start this way. Try it.

Local Organizations

Let’s say you are doing something that has to do with art. You go and talk to the local art groups and see if they can help you fund the project. Maybe you want to start a music store. You can try talking to local organizations. Don’t forget to ask the colleges that have these programs as well.

Do Consultant Work

Startups can be funded by their founders doing consultant work in the industry they are knowledgeable about. Many companies need the edge from a professional and are willing to pay for it. Go search around. You can also teach or run classes. Use your network to find gigs.

Crowdfunding

Crowdfunding is a method of funding a project by the use of crowds putting in little bits of money until you get enough money for the project. The backers tend to get rewards for their backing and sometimes the rewards end up being pre-orders of the thing they are funding. Some platforms are Kickstarter and Indiegogo although there are many more available and some with specific purposes and methods to how they work. People are hoping to get equity as a reward in the future when the JOBS Act has been completely passed later in 2013.

There are crowdfunding platforms for almost everything; Music, apps, inventions, scientific research, etc.

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Fund One Project at a Time

Patreon was designed by an online musician that didn’t want to use Kickstarter for every project he did. So he created Patreon which allows patrons (followers) of someones work to be able to fund thier projects individually. So if one project they like, they can fund that one and if they don’t like another, they don’t fund that one.

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Savings

Sometimes you have to dip into your savings instead of your normal pocket change.

Credit Cards

It is dangerous but you can fund your startup with a credit card or set of credit cards.

Family and Friends

People often talk about getting money from family and friends. This may prove to be annoying and frustrating. For those with small families or families that come from a poor background, this just isn’t an option. This option isn’t a very viable one. You also may make family and friends upset if you fail and their money got wasted.

  • Parents – You can ask your parents or siblings. This may strain the relationships though.
  • Extended Family – If you really want to, you could try asking your uncles, aunts, grandparents, etc.
  • Friends - It may piss off your friends to ask them for money and it generally happens that they won’t be interested. You can still ask. If you don’t end up asking and you ask someone else they may get upset that you didn’t ask them to help as they are your friends. Just don’t get upset with them if they tell you proposal if you do ask them.

Enter a Business Plan Competition (b-plan comp)

You could find and enter a business plan competition. Some of this give funding or other helpful resources to work with.

Government Grants

You could attempt to get a government grant but that is very unlikely to happen.

Incubator

You could try finding a startup incubator that would help you out. That is what they are for.

Tech Transfer

Just look this one up. Tech Transfer on Wikipedia

Bank Loan

Banks used to loan people money more often than they do now. If you are able to obtain a loan you are going to need some skin in the game. This means you would need 20%-30% of the final amount you need before asking for the bank loan. You will also need a rock solid business plan. However getting a bank loan to start a business is a terrible idea. Mark Cuban says it best when he says that you would be a moron to get a bank loan to start a business. You have all this pressure to succeed but then if you don’t succeed you still owe the bank a lot of money. They don’t care if you failed. They care if they get their money.

There are various kinds of bank loans. H.E. (home equity), SBA (small business administration), and commercial. Try not to use a home equity loan unless you want to lose your house.

Investor – Angel Investor

Angel investors are investors you can find through family or friends and generally will provide seed money or financial assistance through a company’s rough patches. Angel investors are easier to work with than VCs and generally won’t give as much funding and will be more hands off than hands on in the project. They are less ruthless than VCs.

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Investor – Venture Capitalist (VC)

Venture capitalists, VCs, are an investor type. They raise larges amounts of money and are more hands on such as being on a board. They are harder to work with than angel investors and are more ruthless.

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