What’s a founder to do when they don’t have the personal capital to get their startup completely off the ground? Get creative with raising money, all without giving up any of your equity.
When I launched my luxury label several years ago, I certainly didn’t have all the cash to get it up and going all on my own. It would have taken me years! It was harder for me to admit that I needed to raise capital and not go at it alone than it was for me to actually get the money I needed to launch my label.
It’s definitely not short sighted for you to hold onto your equity for as long as you possibly can; it’s actually quite smart. Don’t just give it up or give it away.
You won’t have to anyway once you learn how to creatively raise money, so let’s get started on how you can do this.
Friends & Family
This is my favorite funding method, and it’s the one I utilized.
It can be a sticky situation to ask friends and family members to invest in exchange for equity, but it can be pretty seamless to ask them for a loan that you can apply to your startup, and here’s why.
First of all, yes, you need to treat any money you get from friends and family as a loan, not an investment, and certainly not a gift. You need to pay your friends and family members back, or you’re getting yourself into a world of problems. Don’t be that person.
When you do ask them for funding, make sure you outline how you are going to make your business work and what you are going to do to pay them back every red cent. You need to be serious and brutally honest with yourself, and them, because these are key people in your life.
Next, create a repayment plan. Whatever you do, do NOT decide you’re going to pay them all back at the end of four years, for example. You don’t want to be in the situation where the years fly by and you don’t have the money to repay your loan in a lump sum payment. Instead, make continuous payments back to your friends and family.
Your last step is to make sure you draw up an official loan agreement. Although things are getting personal and these are your intimate connections, you need to keep everything business oriented.
Crowdfunding has turned into an increasingly popular way to raise money, and I’m sure you have heard of several startups that have successfully achieved their goals with this method.
Indiegogo and Kickstarter are probably the two most popular crowdfunding sites, but there are tons out there now that you can look into.
The benefit to crowdfunding is that you are essentially giving out rewards (instead of equity) to people that want to give you money. You also get to build your target market before going to market.
The major downside to crowdfunding is that, contrary to popular believe, you cannot just sit back, relax, and watch the money roll in.
It takes an extraordinary amount of work and creative content to be able to succeed in this way, to say nothing of all the studying up you’re going to need to do on how the algorithms on crowdfunding sites work so you can optimize what you do.
Small business loans are another option for you to look at. Yes, it will definitely be challenging to find someone willing to give you a loan as a brand new business, but it’s not impossible.
There are online lenders you can find that will be willing to loan you money, and credit unions are another thing you should take a look at.
Grants are interesting in that they are essentially free money, often paired with mentorship. There are a ton of grants available, especially for women!
It will take you some time to research all the grants you can apply for, but it’s time well spent for you.
Grants come with no strings attached and can even be for a significant amount of money.
Bre is a female millennial go getter residing in New York. One part entrepreneur, one part geek, she obtained her degree in Textile/Surface Design from The Fashion Institute of Technology.
She has held some exciting roles in both fashion as a designer working for brands like Victoria’s Secret and Henri Bendel, as well as in ad tech working for publishers like Ziff Davis.
Today she operates her own luxury label and is also the Chief Chick at Chipchick.com which reaches millions of women each month.
Bre is passionate about keeping women informed of the latest technology trends and products to improve their lifestyle and believes in providing real, useful information and advice to her readers.