Raising capital to fund a new venture is one of the major hurdles to a successful launch. Traditionally, funding options for businesses were few, and most required the sacrifice of funds in the form of interest or a percentage of the business. Now, with a little creativity and initiative, funding can be found in a variety of areas.
When I started my cocktail bitters company in 2012 I funded it almost entirely by crowdfunding. This risky, but amazingly rewarding avenue of funding not only raised the needed funds to launch the business, but gave it a publicity boost that most traditional avenues of funding could never provide.
Let’s look at a few creative ways to raise startup capital.
Crowdfunding came on to the scene in a big way in the last decade with sites like Kickstater and Indie-Go-Go offering a free channel to build awareness and ultimately fund creative ideas.
Though these sites were build primarily for funding creative ideas and not businesses, people quickly found ways to turn creative ideas into businesses with the help of a crowdfunding campaign.
Funding through crowdfunding is inherently creative in that you essentially build a campaign to sell your idea to the public. Sites like Kickstarter allow you to upload a creative video, text and “rewards” for people pledging to your project. You set a funding goal and run a campaign for a set number of days and hope to make your goal. If you do, you are funded the full amount raised. If not, you get nothing, but lose nothing other than your time.
Crowdfunding, while super accessible, is NOT a slam dunk. There are a few critical mistakes that crowdfunders make that lead to stale campaigns and unfunded projects. These mistakes will be detailed in a later article, but here are the top 3 key mistakes that will lead to an unsuccessful crowdfunding campaign:
- Setting too high of a goal
- Not uploading a video
- Running your campaign too long
There is a lot of nuance to building a successful campaign, and there is some really interesting psychology involved in why people choose to pledge certain campaigns over others, but by and large this is an accessible and realistic way to fund a startup.
How much can you raise through crowdfunding? There really is no limit. Some of the more high profile campaigns include Zach Braff’s Wish I Was Here movie, which raised over $3m and Rob Thomas’ much anticipated Veronica Mars movie which raised $5.7m. However, most successful campaigns hover in the 4–5 digit range.
With the right planning and creativity, crowdfunding can be a great way to launch a startup.
Grant money is a great way to launch a startup, particularly if your venture has a cause or a mission that benefits some sort of social or environmental problem. Not all grants need to have this mission-driven slant, but a few high profile organizations will fund new venture that seek to help others. Organizations like The MacArthur Foundation and the Annie E. Casey Foundation provide grants and fellowships for people engaged in just such projects.
There are other grant possibilities for startups on a smaller scale. The FedEx Small Business Grant Contest allows small businesses to compete for grant funding. While there is not guarantee of success, a win in a contest like this can provide no-strings-attached grant money for a startup.
Local regional organizations dedicated to economic development exist all over the US. These organizations recognize the value of supporting new business development for local economies, and put their money where their mouth is by offering small business startup grants and loans.
These organizations can be found by doing a simple web search, or contacting a local Chamber of Commerce. Some organizations only offer loans — a completely viable and time-tested funding option, but not quite the scope of this article — while others offer grants in conjunction with business education.
I received funding from a local organization in my hometown in California that not only provide startup grant funding for my venture, but paved the way to a business line of credit that I would not have had access to without their help. In addition they provide free business coaching and mentorship that was as valuable, if not more valuable than their funding.
Startup pitch or business plan competitions can be a fun and exciting way to grab a little start up capital. These competitions, while they may not provide enough funding to launch a large venture, can provide a modest bit of funding to help move a project forward.
Startup competitions usually involve a live presentation or elevator pitch where you, the entrepreneur, sell you idea to a panel of judges. Pitch contests exists all over the world for ventures of all sizes and scopes. Run a quick search on which contests might fit your venture and apply to compete.
If you live near a university that has a business department, this is a great place to start as they frequently have competitions like this that you as a local startup can participate in.
If you have a viable venture, or a startup that solves a read deal problem for people, why not aim high and try to snag some really high profile visibility on a show like Shark Tank? Sure, this takes the pitch competition notion to a whole new level, and sure the chances of success here are pretty small, but if your idea is good enough and you have a little luck, you might land a huge funding egg that could forever change the trajectory of your venture.
Now is this last idea all that creative, as the headline states? Well, in some sense no, it isn’t all that creative. Shark Tank reaches millions of TVs and is an idea that has been done over and over.
However, I’d like to expand my idea of creative thinking to include the out of the box thinking that brings people to actually take action on ideas like this. The adage nothing ventured, nothing gained applies beautifully to this. By even attending an open call from a show like Shark Tank, you are already miles ahead of those entrepreneurs who thought of the idea, but figured they wouldn’t have a chance or just shouldn’t bother.
I want to leave you with this last though. Creativity is outside-the-box thinking, plain and simple. You do not necessarily need to apply for business loans from the SBA or a local credit union, even though these are time-tested methods for funding. If you think boldly and act wisely, you may find avenues to funding that might escape most entrepreneurs.