If you’ve got the entrepreneurial bug, you may be wondering how exactly you can get funding for the next big idea. Where on earth will you get the money you need to finance your startup?
There’s the most obvious route of course: use your own money. Other well worn methods include getting a bank loan or a loan from family.
But what if you don’t make much money right now and you don’t have the family resources to fund you.
Three Bank Alternatives To Finance Your Startup
Crowdfunding
These days, crowdfunding is a well known way to raise money for everything from buying a car for a man with a 21 mile walking commute to The Veronica Mars Movie Project.
The benefits of crowdfunding are plenty. For one, raising sufficient funds via a crowdfunding site like Kickstarter or Peerbackers is a quick low-cost way to start up.
In addition, it’s a great market research tool and a test of your own commitment to getting the word out. If your project is popular and raises significant funds, you’ve got social proof. This is also a way to build momentum even before you launch your prototype or beta version.
Considerations
On many of these sites, if you don’t reach your target, you don’t get any seed money at all. Most crowdfunding projects never get off the ground. Anywhere from 2 out of 5 to 1 out of 10 projects actually meet their goal on some of the most popular sites. So if this is the only way you have to raise seed funding you’ve got to make it count.
Entrepreneurial and Startup Competitions
There are dozens of small business startup competitions each year. Many are provided via local business incubators and many have the backing of their respective state.
Startup competitions are another great way to test your idea before you even take it to market. You’ve got to have a solid business plan in place before you can even enter many competitions.
Considerations
Some competitions require you to already have a small customer base and business income before you’re permitted to enter.
Angel Investors
If you’ve got a kick-ass idea, a solid elevator pitch, a killer slide deck and a few early adopters and customers, it might make sense to try to get an angel investor. You could get anywhere from $25,000 to $100,000 to finance your startup. Even better, angel investors understand that most startups fail so they’re more likely to be risk tolerant than your cousin or a local bank.
To find angel investors your best bet is usually going to be through a personal connection. Look through your LinkedIn and Facebook networks to see who you know who knows someone. If you have a business lawyer or accountant she or he may have contacts. Other entrepreneurs you know may have ideas about who to get in touch with or you might reach out to your local small business incubator. If you don’t have the contacts you can also try AngelList or an angel investor aggregator.
Considerations
Remember that an angel investor is buying a stake in your business either through debt or equity. Keep that in mind if you’re not sure that you want to share the wealth.