There are plenty of interesting ideas out there. But if you can’t source funding, and you don’t have the funds yourself, your business idea may never get off the ground. 

Many startup founders will turn to the traditional methods: banks, friends or family. However, not knowing other methods to raise capital for your startup could hinder your ability to actually start your business

5 Interesting Ways Startups Have Sourced Funding

Sure, going to the bank may work for some. But for many startup founders, going the traditional route won’t amount to much.

Why? Well, there are three main reasons. 

  • Traditional lenders may reject loan requests from people who may not necessarily be able to prove they have the experience to run a successful business
  • New business owners may lack the financial history and credit rating that big lenders require. 
  • And finally, those sourcing funding for startups tend not to have the items or inventory to use as collateral. 

Don’t fret though. Because there are plenty of more creative and interesting ways you can source funding for your new venture.

5 Ways Startups Have Sourced Funding

1# Crowdfunding 

Crowdfunding has definitely become a mainstream way to fund almost everything you can think of, from helping families with paying medical expenses through to funding people’s weddings. But it has also widely become an excellent way to fund a business venture. 

A great example of a successful crowdfunded business is the Tile App Locator. Within 24 hours of the campaign going live, the $200,000 goal had been smashed.

Before the campaign even finished, the company had raised $2.6 million. It is now a thriving technology company, all thanks to crowdfunding, and a lot of work from the founders. 

2# Angel investors 

Individuals with a keen interest in investing in small businesses and startups, angel investors usually provide better terms than traditional investors.

As an added bonus, many angel investors are business owners or entrepreneurs themselves so they come with a ton of advice alongside the capital they’re investing. 

Many angel investors will tell you they’re more invested in growth rather than big profits, mainly because they’re invested in the drive of the business and the people behind it. A good example of using angel investors is the PayasUgym venture, which secured 200,000 pounds in angel investment funds.

Usually, angel investors will put up anything from $10,000 to a few million dollars. 

3# Think creatively

Take a fun approach to fundraise money for your startup. Some people will refer to this as “personal financing” but there are traditional ways to save and more creative ways.

Whether it’s taking part in product testing, writing movie reviews or holding a good old fashioned garage sale, chip away at the pot slowly and over time, or working a day job on the side.

There are also a ton of ways you can sell things online, whether it’s via eBay, Facebook marketplace or Etsy, find things you no longer need or if you’ve got a creative streak, design goods you can sell and get marketing. 

There are even more non-traditional ways to fund the venture yourself. For example, rather than receiving birthday gifts, take a leaf out of The Unstoppable Foundation’s founder’s book and request an amount of money. Cynthia Kersey took the money and founded NFP, which helps secure a child’s right to an education. 

4# Bet on your success

So sure of your business success? Take a bet on your future earnings. Kjerstin Erickson, Saul Garlick, and Jon Gosier are offering up a percentage of their lifetime earnings in exchange for venture funding. 

Using an online marketplace called the Thrust Fund, the trio has taken themselves and their startup, FORGE, public in the hopes of growing the business, which helps African refugees rebuild their communities.

Erikson herself has said she will swap 6% of her future earnings for $600,000 with Garlick and Gosier offering 3% for $300,000. 

5# Microloans 

And of course, there are microloans – loans provided by private companies, smaller investors and even individuals to promote entrepreneurship. Some people consider these loans personal and it’s not always clear how much a lender will give you. They’re usually best for startups with low capital requirements. 

Many people will use microloans for holidays or emergency repairs on their home, but what most people don’t know is that startups have used short-term loan options to start their own business too. There are plenty of success stories when it comes to microloans. 

From Bernard McGraw who borrowed a $4265 loan to finance his Cajun restaurant expansion to Lidia Calzado who despite emigrating to the US with no English skills and being legally blind, used a $10,000 loan to purchase more inventory for her jewelry and perfume business, circumventing her supplier’s high-interest rate. 

Never give up

Whatever kind of business you wish to start, finding funding should be the first port of call. Every startup needs access to capital and while bank loans and asking friends and family for help is usually first on the list, there are so many other options when it comes to financing your venture. 

It’s just about being creative in your thinking. In fact, the most successful entrepreneurs are those who think creatively about their business and about how to acquire financing.

Most of all though, never give up. You never know who will say yes to investing in your future.

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Author Bio: Sam Want

About the author

From time to time, we feature outside authors on fincyte and publish their informative guest posts online. This is one of those selected guest posts. Further, opinions expressed by Fincyte contributors are their own.

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