Funding is usually one of the stumbling blocks when entrepreneurs have ideas to be implemented.
It is not just an easy road to go, because seeking funds for a startup is not a child’s play.
From experience, prospective investors could be difficult to convince during a pitch session.
They might be interested to invest in your startup but they will definitely need to gather some confidence and conviction before dipping hands into pocket.
Some serial entrepreneurs argue that seeking an alternative source of fund is better than looking for angel investors.
Meanwhile, most entrepreneurs have a misconception about raising funds to startup. They think you would have to raise a very large chunk of income before starting up and that’s not true.
This is money we are talking about, no angel investor would want to key into your vision when you haven’t shown some level of confidence, at least by getting started with your own money.
Open you wallet, get your savings tapped into your startup and gain the attraction you need from an angel.
Tom Walker, President and CEO of Rev1 Ventures, who has been helping entrepreneurs build great companies for most of his career, shares his thoughts on other ways entrepreneurs can raise funds without running to investors.
He’s formed multiple venture capital funds, founded angel groups, is an angel investor, and has used Rev1 Ventures to help entrepreneurs build great companies by supporting them through the first phases of growth.
1. Sign up strategic partners early on: There’s nothing sweeter than finding a supplier, distributor, or especially a customer who stands to gain so much from your solution that they are willing and able to help foot the bill.
This is a planning-for-success bonusplay.
- The quality and reliability of your supply sources, whether for materials or software will be key to your success.
Far better to createrelationships and work out the kinks while your company is simple and small than to discoveran issue when you’re ready to scale.
- If your solution aligns with a B2B business problem that the market is clamoring to solve, there will bepotential early adopters who could make a strategic investment if they think you have a chance at relieving their pain.
Early adopters provide and unique and invaluable hands-on perspective of what’s right andwhat needs to be changed to improve the value proposition of your solution to the markets you plan to serve.
These companies will be less focused on final returns and more interested in getting your prototype to beta.
- Every startup has to sell its stuff. In-house sales teams arechallenging to staff and a challenge to manage.
Before you build a direct sales team into your business plan, explore other options-online, manufacturers’reps, or companies in your industry that sell solutions thatcould be enhanced by yours.
I’ve seen more examples than I can count of early relationship between startups and strategic partners thatturn into something really special that endures for years.
There’s something very appealing about being part of a local startup’s success-especially tocorporations and service providers who are right in the startup’s own backyard.
2. Bootstrap: Paying as you go by earning revenue from early adopters and managing every dime like it was a dollar is the most cost-effective way to stretch your company’s resources-financial and otherwise.
Nothing is scarcer than cash (except maybe sleep) when you’re starting out.
The more you can bootstrap in the beginning to achieve good market validation, the easier you are going to find your path to raising capital.
Bootstrapping Tips
Hold fixed costs to a minimum:
- Share office services and equipment
Co-locate with another company or move to a business incubator
Use the computers and servers you have
Delay capital purchases
Leave instead of purchase
Negotiate fees and terms with all service providers and suppliers
Treat variable costs like you’re spending your own money, which you are:
- Seek trade credit terms with key suppliers
Save thousands on travel by using smart scheduling or teleconferencing
Hire interns from local business and/or design schools
3. Pursue non-dilutive capital: Grants, solicitations, and RFPs may not be a fit for every company, but make sure it’s not “yes” before you say “no.” Some industries, such as biotech, are especially conducive to federal grants.
And don’t forget to look in your own backyard. More and more cities, regions and states have grant programs or loans for high growth businesses at low-interest rates.
The beauty of these sources is that a startup may qualify for large sums ofmoney, which are milestone driven, which is the way you ought to be thinking and operating anyway.
4. Match capital to milestones: Too much capital is as bad as too little. Matching capital requirements to achievable milestones keeps thecompany from giving up equity before it’s required.
5. Establish a line of credit. Even if you don’t use it, bankers will return your calls once one of their competitors has vetted you.
There are no silver bullets when it comes to sourcing early-stage funding, but with the right capital strategy and a concentrated emphasis on bootstrapping entrepreneurs can avoid shooting themselves in the foot.
Let know your thoughts on the comment box below.