Creating a new venture is going to require money. The sources of money are almost endless. The successful entrepreneur will be financially ingenious about finding ways that do not even have a name. Here is a list of 25 different sources that include obvious and not so obvious ones.
1. Your own money, obviously; try hard to avoid personal guarantees, personal credit cards;
2. Gifts, loans or equity from family & friends—see the Venture Founders Insight on Loans from Family & Friends;
3. Leasing equipment rather than buying; don’t forget specialists like AEL, who will even provide leasing for software;
4. Sharing the acquisition of equipment that you do not utilize full-time with other like-minded entrepreneurs to make optimal use of assets—not exactly finance, but avoidance of investment;
5. Seek any opportunity for uberization—using excess capacity in the business field;
6. Do the reverse and use social media, or your own social network to monetize your own excess capacity;
7. Use Maker Spaces to produce prototypes or small batch pre-production runs, if you are a manufacturing venture (see the Venture Founders Directory of Maker and Hacker Spaces);
8. Start the venture in a co-working space (see the Venture Founders Directory of Coworking Spaces); or consider starting one of your own;
9. Seek underutilized space in local government properties—see for example the NYC Economic Development Corporation;
10. Seek underutilized space in company properties; for instance LA-based company DubbelSpace has set up to help its platform firms do just that, but you can do it yourself;
11. Debt: loans and lines of credit finance (banks, others, online)—not as easy as you might think, since they depend upon the 4 ‘Cs’: Capital (how much is already invested), Collateral (what you can pledge against the loan), Capacity (how you can show the ability to repay); Character (your personal story and credit);
12. SBA 7(a) loan guarantees, Microloans and Community Advantage Loans (rural areas);
13. Equity Capital: angels and angel syndicates; best done through your personal network, but take a look at Online Funding Platforms (e.g. angel.co, gust.com, invstor.com, or fundingpost.com);
14. Equity Capital: venture capitalists/private equity/family offices; probably not for you, at least until you have other funding in place and a good trading record—according to data compiled by Fundable, only 0.91% of startups are funded by angel investors, while a just 0.05% are funded by Vcs; a friend of mine, Hall T Martin recently set up an excellent 501c3 called investorconnect.org, where he publishes podcast interviews with business angels and venture capitalists on many topics. You can find angels & vcs that may be of interest to you, or ask your own questions; there a resource section, too.
15. Sources of Capital for Mission-Driven Ventures (e.g. minorities, women)—see the Venture Founders Directories of Funding for Female Founders, and for Mission Driven Capital;
16. Crowdfunding esp. reward and equity (see the Insight on Equity Crowdfunding);
17. P2P (Person-to-Person) lending—a form of crowdfunding: sites like Prosper.com, LendingClub;
18. Intrastate Crowdfunding (35 States have crowdfunding exemptions, check the Securities Division in your State), where you can crowdfund within your own State;
19. Direct Public Offerings (DPOs for companies or nonprofits); there is less cost and bureaucracy than for a Public Offering (Initial Public Offering); primarily used by small to medium size companies and nonprofits who want to raise capital directly from their own community rather than from financial institutions like banks and venture capital firms; do not require an investment firm, but it may be good to use arrangers like Cutting Edge Capital;
20. Grants and Subsidies (from Community and other Foundations, Companies & government);
21. Federal/Local Incentives (e.g. SBA’s Innovative Research Grants, USDA’s Rural Business Investment Program);
22. Revenue-based Financing: a type of small business loan where your monthly payment increases and decreases based on your revenues; lenders charge a fixed amount (quite high) for this growth capital, but of course you have to have been in business for 6 months to get such money; a source for tech companies is Lighter Capital, for instance;
23. Specialist Funders (e.g. RSF Social Finance, Saturna Capital);
24. Business Plan Competitions (open and restricted);
25. Micro-loans (e.g. Grameen US, Accion US) especially for ‘minorities’;
26. Bank SouSou, a mobile-first investment platform that partners with financial institutions and angel investors to decrease the time, cost and risk associated with lending to startups and early stage companies;
27. CDFIs for low-income communities and people who lack access to financing; find one here;
28. SBICs (equity and debt investments—314 licensees, not all investing currently); a Small Business Investment Company is a privately-owned investment company that is licensed by the SBA), that supply small businesses with financing in both the equity and debt arenas;
29. Spin-Out: if you are already employed and are contemplating a startup, you may have the opportunity to spin-out from your employer; this involves taking some assets and maybe staff with you; of course the original firm will probably expect a stake in the startup/spin-out, but you get a standing start and probably an order book;
30. Get creative! For example, starting a business in 1982, I took over the premises and equipment of the division of a company that I used to run; I negotiated to pay off what was effectively a loan over twelve months interest free, because the company saved finding a tenant and disposing of the equipment.
