Why you need funding
Even if you decided to bootstrap your company, it is still a valuable idea to review the opportunity to be funded. What would the reasons be?
I had already posted a few months ago the question if you really need to look for investors. And the reasons for questioning getting money from investors were mainly that investment money is the most expensive money and in addition, it takes a lot of effort and time to raise money.
The time when you know you need an external investment is when you target big markets and there are already big players on that market. There is also that ‘being strategic’ angle of getting funded by the right investors. Once they put their money in your startup, you can be sure that the investors will pull all the strings and do everything that is needed to help you succeed. That is how they will make their hefty ROIs.
Even if you have the investment and don’t really need financial help, it is still worth getting investors on board for the reasons I already mentioned, plus to hedge a potential downturn, which can always happen with a startup.
It is advisable to already have something out there and if for example, this is an online business, try to generate traffic and sales/revenue first. That way you will know much better how much money you need and for what purpose.
Alternatives
Working and finding investors is a full-time job and many times founders feel that they would have been better off working on their product and marketing than putting the effort to deal with investors. Here is when it might be worth investigating alternative ways to fund your startup.
Crowdfunding
Kickstarter – This is probably the most popular crowdfunding platform. Kickstarter serves artists, musitions, designers, and other creators to find the support and community they need. Based on experience, Kickstarter is more fit for projects that have a physical product as result. Software and web orijects may not be the perfect fit.
Indiegogo – The Kickstarter rival offers crowdfunding platform, but the difference is that you will receive all pledges, no matter if your ask is met. Indiegogo has broather audience in terms of people willing to pledge. They also seem to accept wider type of projects.
CrowdEngine – Allows you to strat your own funding website. This is the engine bihind it, not the frontend like Kickstarter or Indiegogo. They profile their solution towards different industries and funding opportunities, like real eastate, or private equity, etc.
StartEngine – This is a marketplace where investors and startups meet. You can create an investor profile and sift through the companies online for investment opportunities. On the other side in this marketplace are startups seeking funding. It is an equity crowdfunding paltform, which differs from the pure crowdfunding platforms like kickstarter and Indiegogo.
Republic – Another marketplace for investors and startups. It is a funding portal and a broker dealer SEC-registered and FINRA member. In other words – the real deal. Republic is part of a bigger startup platform and works together with AngelList and Product Hunt.
Wefunder – If you want to be part of something visionalry, and your main goal is purpuse, not making tons of money, this is your platform. “Invest for the Right Reason” is their moto and the Wefunder founders appel to the human factor in any investment.
MicroVentures – As they say in their name, this company is somewehre between traditional venture capital money and crowdfunding. They offer a place for accredited and non-accredited investors to have access and invest in startups. For startups it still looks like a crowdfunding campaing, but the investments may happen alongside Ventrure Capitalists.
Revenue-based financing
Lighter Capital – If you have revenue, this might ne an interesting opportunity. Lighter Capital essentially offers loans and lines of credit to startups, which can be an interesting alternative to seeking funding from investors. This can be a much cheaper way to have access to funds than give up equity.
Clearbanc – This is another alternative to get funds without giving up equity. The differentiation point for their service is that all decisions are made using data science to help them identify high-growth funding opportunities. In other words, your statup will go trhrough a vetting process based on data and applying data science methods.
Credit
Brex – This is Mastercard product that provides some breathing room to startup founders. Easier approval porcess with high-security product. They also have tailored offerings for specific industries, like e-commerce, for example.
Conclusion
There are many alternatives to working with angels or investors, to have access to capital.
Being funded by investors is the most expensive capital that you will get, but sometimes it is also the only capital that you may have access to.
There are many viable alternatives to seeking investors the tradinional way. Crowdfunding offers many benefits, the bigger one would be that you don’t have to invest time into building relationships and meeting on-on-one with potential investors.
Don’t foget that being funded on a crowdfunding paltform is also a very good validation point, which is an important benefint and an interesting side effect.
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