5 creative ways to fund your business
5 creative ways to fund your business
Launching a successful business takes a great idea, but it also takes capital to turn that idea into a reality. While some businesses require , itâs likely youâll need at least a little seed money to get off the groundâand more as you grow.
Traditional , such as bank-provided business loans, can be a powerful tool for established businesses, but their requirements typically make them unobtainable for newer operations.
Instead, entrepreneurs often have to get creative, turning to crowdfunding platforms, presales, and grants for the funding they need. spoke with seven founders about how they raised the capital they needed without traditional debt financing.
Investors
If youâve ever seen an episode of âShark Tank,â you have a general idea of what it means to . Rather than a loan you have to pay back, investorsâtypically professional firms or wealthy individualsâprovide capital in exchange for an ownership stake in the business.
Cofounders Vicky Pasche and Charisse Pasche used a combination of funding strategies to get gender-neutral fashion brand Dapper Boi off the ground. That included an angel investor whom Vicky met through a business mentor.
âShe had introduced me to our very first lead investor who signed off on our first big investment of $250,000,â Vicky Pasche says on . She adds that patience is key, as building these relationships can take time to materialize. She suggests having a strong pitch deck ready to goâand being willing to nurture every warm introduction you make.
Crowdfunding
With crowdfunding, your investors are lots of individual donors, many of whom kick in a relatively small amount of money. like Kickstarter and Indiegogo connect entrepreneursâ campaigns directly to investors. From there, business owners can collect funds, typically in exchange for some incentive, such as a discount, free product, or even an equity stake in the company.
David Levy, founder of Bola Grills, used this strategy to secure about $22,000. âI would highly recommend crowdfunding to anybody thatâs starting a project, the reason being that youâre able to sell the idea and actually get some revenue without having a product,â .
Similarly, Heather Aiu and Rachael Leinaʻala Soares raised about $6,000 from a Kickstarter campaign before they launched their waterproof bags. They used that money and 200 samples from their manufacturer to rent a booth at a trade show and secure some of their first customers and distributors.
That isnât to say that crowdfunding is easy. Levy adds that trust is criticalâdonors need to have faith that youâre going to follow through on your idea.
To learn more about what makes a campaign successful, try following other compelling crowdfunding campaigns and studying their strategies. This has worked well for Jamey Stegmaier, who has run upward of eight successful crowdfunding campaigns for his board game company, Stonemaier Games. âObserving and participating in other campaigns is the best way to understand which tactics you want to emulate and which you want to avoid,â .
Friends and family
Your personal network can be a powerful tool when youâre in startup mode. Friends and family funding is a legitimate way to fundraise, and the people who know you best might believe in your vision more than anyone else. You can also tap your professional network. If youâve made a name for yourself within your industry, and youâre launching a new business within the same field, think about leveraging the relationships youâve built along the way.
Amy Liu, founder of the clean skin care brand Tower 28 Beauty, did exactly that.
âI feel like I had maybe the easiest time fundraising of anyone Iâve ever known,â . âI raised $500,000 totally pre-launch with nothing but my resume and a deck, and honestly, a very different deck than what I ended up launching.â
Liu credits this to her 20-plus years of industry experience, which built immediate trust with her network in the beauty world.
Asking your personal contacts for cash can feel uncomfortable, so Liu suggests taking a softer approach. âInstead of asking people to invest and give you money, ask people for advice,â she says. âEverybody loves to give advice, and then they will tell you, âI want to invest.ââ
If they donât, you can ask them if they know anyone who might be interested in this opportunityâthey might even make an introduction.
Presales
If youâre running a product-based business, can unlock a wave of capital. Customers pay upfront, providing the funds necessary to fulfill orders and scale the business. Not only do preorders prevent you from spending money on inventory that doesnât sell, but they can also validate market demand for your product and help you gather valuable data about what your customers want.
This approach was a game-changer for hydration brand Waterboy. After gaining traction on TikTok, cofounders Mike Xhaxho and Connor Saeli launched a presale campaign to see if that social media popularity would translate to actual sales. âThatâs when we sold what would have been the entire first production run in the first hour,â .
Limited-time, single-product presales were also a powerful business driver for Dapper Boi, providing the capital to fund production, while also building customer excitement. âI think what was key was that FOMO, you know, that sense of urgency for customers. They wanted to get in on it,â says Vicky Pasche. âThatâs how we had to bootstrap and people were ready and waiting for every single campaign and willing to wait also for the production to be complete.â
Grants
are unique because they offer funding that doesnât have to be repaidâand you generally wonât have to give up any equity.
Evan Quinn and George Youmans, the cofounders behind beverage company Hiyo, signed up for a venture competition sponsored by UCLAâand won first place, securing a $40,000 cash windfall.
âWe did our first production run because, as a food and beverage product, youâve got to make something,â . Hiyo gained momentum and went on to secure funds from other investors, including one of the judges from the competition.
Thereâs a wide range of grant options out there, but theyâre also highly competitive. Expanding your search might lead you to untapped opportunities, like grants that serve specific types of entrepreneursâwhether that be college students or local residents. Sisters Niki and Ritika Shamdasani, who cofounded the South Asian-inspired apparel brand Sani, took this approach to raise $100,000 through college grants alone. That included $25,000 from a pitch competition at Smith College. And they didnât stop there.
âI think for anyone, there are probably local opportunities, whether at the college level, the state level, or the county level, and we would just look for as many of those as we could,â .
They suggest researching each organizationâs core values and past winners before applying to better understand what theyâre looking forâand help you craft a stronger pitch.
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