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As an entrepreneur, what is your best tip to secure funding for a startup?
To help you with securing funding for your startup, we asked small business owners and entrepreneurs this question for their best strategies. From using commercial finance brokers to finding value-aligned investors, here’s advice that may help you fund your startup.
Here are 14 strategies to secure funding for a startup:
Use commercial finance brokers
It’s easy to get overwhelmed by all of the different loan types out there, but going with a commercial finance broker makes things easier. For example, if you’re in need of equipment financing, a commercial finance broker can connect you with trusted financial institutions in their network. These brokers play the middleman and make the process smoother than going through it alone. A commercial finance broker can help connect you and your business with a commercial lender that’s right for your needs.
Carey Wilbur, Charter Capital
Try a traditional bank loan
Online lenders and angel investors are all the rage, but those don’t appeal to everyone. Assuming you have good credit and are more than capable of making on-time payments, you might want to seek out a more traditional bank loan. You may actually find that you’re pre-approved for a business loan from your own bank. These kinds of loans often offer more favorable terms and amounts than other funding sources.
Randall Smalley, Cruise America
Participate in local contests
Part of the difficulty in securing funding for a startup is getting your idea in front of the right people, however, if you lack contacts or a solid business resume, that may be difficult, and why local contests can be a good option. Recently, local business organizations, inspired by shows such as Shark Tank, have been mimicking that concept to allow aspiring entrepreneurs get their ideas in front of viable investors.
These contests offer two great advantages in that they provide the opportunity to get funding, and they allow you to refine your pitch, in order to better your chances of acquiring capital on the next go around. By taking the time to research where these local contests are taking place, and making the effort to put together a refined and eye-catching pitch, you can both increase your chances of funding, while expanding your skills and contacts for future opportunities.
Omid Semino, Diamond Mansion
Give investors a firsthand experience of your process
We put together a solid investor deck outlining our strengths and product-market fit. Then we asked ourselves, “How do we create a splash with this deck?” and “How do we get attention?” The most common questions from our customers and our vendors were “How did you do it?” and “How did you launch in such a short period of time?” So, we produced an 8-part video series on how we launched SnackMagic, from the initial idea, pivoting from our existing venture, launching, getting our first order within three weeks, and then scaling it up in eight months. Posting these videos on YouTube helped put our name out there, and they also showed our company culture and how hard our team works together. We also asked interested investors to redeem a treat so that they could go through the experience of actually receiving a box. Finally, we invited them to come and pack up a few boxes to understand the efficiency of our operation first hand. Doing so helped us raise $15 million in our Series A round of funding.
Shaunak Amin, SnackMagic
Find an 0nline lender
Given how much competition is out there, you may be able to find an online lender with favorable terms and rates. Many online lenders even offer the chance to compare themselves with others, giving you more choices than more traditional lenders. Best of all, you won’t have to give up any control of your company. You’ll also have the chance to build a relationship with the lender that could come in handy if you need more money down the road.
Lily Yu, Oak Springs Realty
Check your local SBA
The government’s Small Business Administration program offers grants to some small businesses run by veterans, women, and other minorities to fund their vision. The grant money is dispersed locally, so if you fall into one of these categories, reach out to your local SBA or Chamber of Commerce to see if they have available funding you can apply to receive. Beware of the fine print – some grants require you to pay the financing back or adhere to certain conditions and stipulations of use.
David Aylor, David Aylor Law Offices
Network and pitch
Utilize your network and perfect your pitch. Leverage the connections you’ve made in your professional career to learn who will be your most likely investors. Before you ask for funding, you have to create a clear business plan and determine how you’ll reward investors. Your pitch should focus on how investors will benefit from supporting your endeavors. When you present trusted connections with a plan for return on investment, you’ll secure your funding.
Justin Soleimani, Tumble
Secure funding at accelerators and incubators
There are so many accelerators and incubators that support small businesses and startups, especially if the idea is innovative, sustainable or impactful. If your startup solves a problem, it’s very likely that you can be offered a small business grant or get the funding you need through an accelerator. This will require you to not only make an elaborate business plan but also have a prototype that explains how your product/service will work. Doing proper research and using storytelling can bring a startup a long way and help them secure funding at an accelerator.
Michael Nemeroff, Rush Order Tees
Look into crowdfunding
One of the best ways to secure funding is by using crowdfunding. Many startups now resort to crowdfunding to help finance their business ideas without getting investors involved or selling shares to their company. It also helps reduce the risk of putting all your money into the business from your own pocket or even taking out a loan and risking starting off your business with debts. Crowdfunding is also useful as it helps raise awareness for your brand and see how people react to your product even before you’ve invested money into it.
John Gardner, Kickoff
Build a strong team
The one thing I have come to realize about mentoring is that investors want to know the team behind the idea. It’s been said many times before, but investors invest in people first. I have seen partners go straight to understanding the team behind the idea. Whom does the team comprise of? What are their background and expertise? What is the allocation of skill ratio? My advice would be to spend time building a strong team & surrounding yourself with investable people. In theory, it’s simple. In practice, not so much, but crucial nevertheless.
Ross Kernez, Health Plan One
Create something unique and validate it in the marketplace
To secure funding for your startup, my best advice is to ensure you have created something unique or different — and that it’s been validated by the marketplace. For example, you might be pre-revenue, but that should not stop you signing up beta customers/customer advisory board to test your product and give feedback to verify product-market fit. Use the positive feedback in your investor pitches as social proof, and use the negative feedback to improve your product or service. Make sure your company’s uniqueness or difference is woven throughout your messaging on all marketing and sales channels to create consistency as well as amplification. It’s a great time to be raising money, and companies who can explain how they benefit customers, why customers should buy from them, and how they’re different from the competition have a huge advantage.
Kim King, New Leaf Communications
Finance your business yourself or enlist family
Life can be rough for an aspiring entrepreneur trying to secure funding for a startup. If you’re determined and willing to sacrifice a good night’s sleep to be your own boss, it’s high time to strap your boots and see what’s hidden in your savings account.
Bootstrapping essentially means financing your business by collecting any personal funds. Usually, it includes ransacking your savings account and credit cards. It’s the most risk-averse way to start your business, as you avoid extensive loans or monthly installments. Though if you plan on scaling fast, bringing outside sources for funding would be more beneficial.
Another option considered to be controversial by some is asking your close friends or family to chip in. Mixing family and friends with business is a notoriously sensitive subject, but your loved ones are less likely to demand high-interest rates, and even if your family are not the Rothschilds, a few grand to finance your website can make a huge impact.
Natalia Parcinska, Spacelift
Know the market, know your product
VCs and other investors will always look at two major things before investing. The first is how big is the market? The bigger the market, the bigger the opportunity. The second is what’s your moat? What differentiates you from your competitors? If you could get these two questions right and have a compelling product in a big market, then getting funding gets a little easier. There are other factors of course in play such as the problem, your solution, team, traction, etc.
Akshay Dipali, Nasch
Find value-aligned investors
When looking to secure funding for a startup, you should always be firmly rooted in your values. You want to find investors who you can connect with on a personal level. That means finding people who understand and appreciate the values your business is based on. By doing that, you’ll create a better relationship that’s centered around loyalty and trust. Everyone wants to work with people they like; it creates a better working relationship that leads to better success.
Anne-Marie Faiola, Bramble Berry