Our previous article covered everything that you need to know to raise funding for a startup company. In this blog post, I wanted to bring attention to a few online tools and ways that you can use to get startup or working capital for a new business.
1. Equity Crowdfunding
If you haven’t heard of equity crowdfunding before, it’s basically Kickstarter for investors, meaning that a crowd of investors can put money into your business or startup company after reading through the documents and video that you’ve provided online.
There are a lot of platforms out there in the equity crowdfunding space, but the most popular continue to be CrowdCube and Seedrs in the UK and Crowdfunder, CircleUp, EquityNet, and Fundable
Sample Equity Crowdfunding Campaign: iNeed, which raised over £200,000 on CrowdCube and Seedrs.
2. Online Loan (Peer to Peer Lending)
There many websites out there where you can secure a loan online for your business or startup company, the most popular being Lending Club and Prosper.
Although I have not personally secured capital for a business using one of these platforms (I don’t like the idea of having debt), there are good resources out there to learn about this type of crowdfunding, like Lending Memo and Lend Academy.
Depending on the platform and particular loan, you may be obtaining capital from a variety of retail investors or institutional investors.
3. Perk or Rewards-Based Crowdfunding
Of all the different ways to raise money online that I’ve seen, rewards-based crowdfunding has the lowest risk and the most potential for a great return.
First of all, it doesn’t cost anything to create a crowdfunding campaign on one of the major platforms and, if you’re doing an “all or nothing” fundraising model, then you won’t have angry customers asking for their money back if you fail to hit your goal. Their card won’t be charged anyway.
The one major drawback is that you really need to put yourself out there if you want to raise funds and throughly prepare for your launch to stand out in the Kickstarter or Indiegogo marketplace.
Sample Rewards-Based Crowdfunding Campaign: SolarPuff, which raised over $446,000 on Kickstarter.
4. Find Angel Investors
Although it may be an indirect way of financing your business, you could use networks like AngelList, LinkedIn, the Angel Capital Association, or Gust to find and meet angel investors.
In my experience, one of the most important factors when securing a seed stage investment is the technical abilities and drive of the founding team. It’s true that the founding idea and market does matter, but considering that it’s unlikely you have true product-market fit at the time of an initial seed round, the team is more heavily weighed (feel free to share your thoughts on this in a comment below).
It’s easiest to sell an investor in your local network on the merit of the founding team, which is why in-person events through Meetup.com and Eventbrite are a great resource for networking with angels (I met an angel last week from attending an event in NYC).
5. Asking For Donations
Finally, I would not recommend this route, but you could always ask for donations from your social or local network in order to start the business.
The reason I would not recommend this route is because the ask is not dire, meaning that you don’t really need the startup capital and rather than risking your social capital, it would make more sense to offer friends a piece of the business in exchange for an investment, or to ask them for your first referrals or testimonials when starting the business.
If you are dead set on going this route, there are some platforms that you can use to collect donations. Again, I really don’t recommend going this route to secure the initial capital for the business. It would make more sense if you could get a part-time job to fund the business in the early stage or offer consulting/services using the skills that you’ve perfected in your career for some cash during the early stages of the business.
What business are you starting?
Let me know in a comment below so that I can check out your company’s website. Also, feel free to ask any questions. I respond to all comments twice a week.
