In this article we tackle the seemingly impossible problem of attracting money before you have much of anything to support your request. These funding rounds are called “seed,” “pre-seed,” “pre-launch,” or any number of other terms, depending on who you talk to. Those providing the funding don’t necessarily have to be professional investors; here are three non-professional investor options for funding your startup.
1. Everyone is a Potential Investor
• Start by reaching out to your personal network. Many entrepreneurs instinctively start here, and for good reason; chances are you’ll find someone willing to provide at least some funding. Personally, I’ve always avoided this source because, although I believe in my idea, I know how risky startups are and may not want to expose friends or close colleagues to that risk. Use your best judgment regarding who you pitch and how much you ask for.
• Regardless of whom you ask, always have a “growth mindset” around funding. With every “no,” ask why, and take that feedback into consideration in your next pitch.
• You may also consider a securities offering via crowdfunding, thanks to the new crowdfunding legislation which help startups raise capital while providing investors with additional protections. Now, crowdfunding portals allow you to register your business and raise a funding round very early on.
2. Make Sure Your Team Is Ready
Without a fully-formed product or service yet in place, team experience, credentials and references such as university contacts or past employers can instill investor confidence early on. Even if your idea for that product or service is astoundingly good, it’s your team that counts — investors often value a good team over a good idea. And if your idea is so good that your market validation is off the charts (i.e., you hit the next big thing at the right time), your team needs to be able to convince investors that they can execute today. It always comes back to execution.
3. Consider Bootstrapping Your Business
Bootstrapping begins with raising a minimum amount of startup capital, typically from a salary, to build a skeletal framework which is used to close your first customers or “anchor clients.” Personally, this has been my favorite approach, but there are loads of limitations. For example, it’s not very useful if your business requires a lot of capital and you don’t have that kind of money, or if your business does not generate money quickly. But it is great in that it forces you to consider your entire business from the get-go.
This is just a starting point, of course. But if you’re just getting off the ground, we’re always open to discussing more. Contact us and let’s talk about what can be done to attract new investment.