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10 Proven Ways To Fund Your Startup Business

One of the most frequent questions we get asked as mentors to entrepreneurs are, “How do I find money to start my business?” If you are asking the same question, you have come to the right place. First off, congratulations on having a great idea! If you have a well thought out business plan but no funds, there are various ways of funding and financing options you may be unaware of. We always answer that there isn’t any magic trick you can perform to get some cash—no one will throw money at you just because you believe in your exciting idea. Given that there are many options out there, you have to figure out which method of fund raising is right for your idea. Thoughtlessly raising money can lead you and your company into dangerous situations.

Before you raise capital for your startup, identify all the different sources of funding, and find the one that is most compatible to your needs. In the beginning, the reason you need the funds is to build the product or test the service in the market. In this beginning stage, angel investors are great for the short term testing of the waters. Long-term funds will require more expansive fundraising from venture capitalists and eventually an initial public offering (IPO).

1. Invest Your Own Money

The majority of entrepreneurs cannot afford to use their savings to build and sell their idea. The most popular source of startup financing is the founder’s personal savings—but this doesn’t last long. Should you pour all of your savings into your budding business? Should you use less than fifty percent? If you can completely afford the expenses, there is no need for you to raise capital somewhere else and you will be the sole profit maker. Using your personal savings is part of the entrepreneurial process, but be careful not to leverage all of your personal assets to start your business.

 

2. Friends and Family

You may have some money saved up, but certainly not enough to turn your dream into reality. Ask for help from your friends and relatives. Having to show that you are professional and responsible may be a lot easier with your friends and family. Don’t take the money from just anyone. Make sure they understand the risks and only give enough they are willing to potentially lose. Inform them that ninety percent of startups fail, but reminds them of what they can win back when your business plan becomes a success. Make sure that you aren’t greedy and remember that you have to live with these people even if your startup fails.

Given their relationship to you, be prepared to answer many questions about your business and constant phone calls about the progress. Show them that you have done your homework with industry experts and potential customers, and convince them that you are passionate about your cause, and not that it is simply a hobby. Let people see your own investment and commitment. Most agreements at this stage will be based on a convertible note, a loan with specified duration and interest, with an option to convert it to equity when professional investors come in later. You may choose to hire an attorney to make sure that all terms are fair and to show your respect and professionalism.

3. Loans from the Bank

Similar to loans we take for tuition or your dream house, you can take out a personal loan by giving in your business plan to some national banks. This may be easier for some than others, especially if you have a good credit history or existing assets that you are willing to put at risk for collateral. If you are an American start up, you may find that the Small Business Administration (SBA) can get you infusions of cash without the usual backup requirements.

4. Use the Internet

Develop a website that provides information to prospective clients/purchasers and donors, including reports, statistics, and news. Email newsletters and blasts are a useful tool to keep your clients and donors in the loop.

Market your website aggressively. Include your web address (URL) on all of your marketing materials, submit your site to main search engines (Google, BING, Yahoo, AOL), and optimize your site so that those search engines can find them. Contact other companies for affiliate links or advertisement features. Spread the word– without visitors to your website, you won’t receive any donations online.

Make sure your website has an e-mail newsletter sign-up box on every page of your website, and directly ask them to sign-up for your e-mail newsletter or to receive a special report or other incentives via e-mail. Be relentless in trying to get e-mail addresses. The ability to communicate with people through e-mail is much better than any social media campaign.

Make it easy enough for people to make contributions by setting up a page specifically for donations, or a big box on the side of each page. Most donations made online are done by credit card transaction, so make sure you are set up to accept credit cards. Offer the option of recurring donations and allow donors to pay through PayPal.

5. Events

Fundraising events are a great form of fundraising. They have the potential to be great moneymakers, but they are often time consuming and expensive. Therefore, it is crucial to carefully plan these events. Invite people to buy tickets online and organize an event to fundraise. Whether it be a walk-a-thon or a networking event, make sure that you show progress and have your fundraising pitch ready.

Is your main goal to raise money or to gain publicity and reach out to a new network? A critical first step is to determine what the true purpose of your event is. Your next step is to decide what your fundraising goal is for the event. Once you have built together a committee full of organization staff and key fundraisers, everything else must be planned towards raising your specific capital goal. Keep in mind that the amount you choose should be a net profit, the amount you plan to raise after you deduct the expenses of hosting the event.

Once you delegate leadership responsibilities and gear your event towards a specific audience, you must plan the procedure for raising capital. Do you want to make money off of ticket sales or simply donations? Will there be different contribution levels for the event (with prizes for larger donations)? Make sure you secure contact information for all participants, donors or simply guests, and keep them on an email list so you can inform them of your progress and keep your company name in their mind.

It’s always a good idea to meet your supporters face-to-face. Express to your donors how appreciative you are of their help and how you intend to put their money to use. Tell them more about your work and follow-up with each attendee for feedback and address and of their concerns.

6. E-Mail

Most startups use their websites, social networking sites, and e-mail to stay in touch with donors and clients. E-mail letters, like fundraising letters, should be compelling and emotional. Your goal is to have the recipient open and read your e-mail, so your organization is crucial. Don’t include boring facts and statistics, although feel free to include one or two fascinating facts that you feel will truly make the difference. Think of an email as a thirty-second pitch. People are busy; they aren’t too interested in reading your fundraising email. Grab their attention. The e-mail subject, first sentence, bolded or underlined words, they are what make all the difference. Give your audience a catching opening sentence and draw attention to certain words by bolding, underlining, or changing the color.

People wont just donate out of the kindness of their hearts. Make sure that your email is clear, concise, and the reader understands that you are asking for money. Explain how much you need and why you need it. What do you intend to do with the money? Insert a button or a link that connects to your website—ask them to donate now. Don’t be shy when asking for money, you have a great idea and your company will make a difference!

7. Social Media

Your goal on social media is to turn your followers and fans into donors. The primary concern for your company is getting new supporters and driving them back to your website, where you can collect their e-mail addresses. Do not send spam and do not buy lists or pay someone to get e-mail addresses of potential supporters. Only email those who have signed up to receive e-mails from your company or have expressed their interests before, for example in an event you held.

We often hear that companies get disillusioned with social media because they feel like they don’t get as much in return for the hours they spend on posting, updating, following, and liking. The truth is: you don’t need to spend a lot of time on social media to reap significant benefits. You should be spending about fifteen minutes on each social media site you are involved with every day. Thus, if your company is on Facebook and Instagram, you should be spending a total of thirty minutes on social media each day. Given that you can connect your social media platforms using your website, you can integrate LinkedIn, Facebook, Instagram, Twitter, Tumblr, and Pinterest to post all at once. You can even sign up for services that will follow, like, and comment on Instagram for a specific targeted audience. For example, if your start up idea involves pets, you can set your Instagress account to only like and comment pictures that use the hashtag #dogs or #cats, or a specific breed. Similarly, FollowingLike will run all of your social media accounts (Facebook, Instagram, Google+, LinkedIn, Pinterest) at the same time to follow, unfollow, like, pin, comment, and share. You can even manage your visual content campaign on Instagram, Twitter, and Facebook without logging in! Later allows you to plan, schedule, and publish pictures for free!

8. Crowd Funding

Crowd funding is the process of raising money to fund a project through many donors using an online platform. Crowd funding combines online fundraising with social media to help raise funds. There are several websites set up for crowdfunding. The well-known ones include Kickstarter, Indiegogo, and GoFundMe—all of which take a 5% fee. Other websites include: Patreon, YouCaring, CrowdRise, DonorsChoose, Kiva, and GiveForward. The fundraising window is usually finite – such as 180 days—and the fees vary across platforms. People can often donate through the fundraising campaign’s website and often receive some soft or acknowledgment or reward in return for their donation. Websites like Crowdfunder are equity-based platforms that are used for businesses looking to raise investment capital.

9. Incubators and Accelerators

Business Incubators are organizations geared toward speeding up the growth and success of startups and early stage companies. Incubator funding can be a great option for your company to get off the ground because they form a path to capital from angel investors, state governments, and other investors. They offer funding, connections with top investors and mentors, and collaborative work environments that can last up to a whole year. New York tech programs include: TechStars, NYU-Poly, Entrepreneurs Roundtable Accelerator, FinTech Innovation Lab, First Growth Network, DreamIt Ventures, Founder’s Institute, General Assembly, and NYC Seed. These physical incubators are meant to foster networking among entrepreneurs, but many operate on a virtual basis as well. Incubators often call themselves “accelerators” instead, especially if they are more geared towards jumpstarting businesses that are already more developed.

If you’re interested in finding an incubator in your state, visit the National Business Incubation Association’s website.

10. Local Angel-Investor Groups

Angel-investor groups are groups of local high-net-worth individuals interested in supporting startups. Beware that these groups may be difficult to find if you don’t live in a metropolitan area. You can use online platforms such as Gust and Angel Capital Association to find them. New York Angel-Investor groups include: New York Angels, 37 Angels, Empire Angels, Golden Seeds, Tri State Ventures, and ARC Angel Fund. These groups are not funds and do not invest as groups—their members make individual investment decisions after hearing your pitch. These investors usually invest between $100,000 – $1,000,000 in seed and early stage companies, and syndicate deals with other angels and venture capitalists up to $2 million.


Fisher Stone Law- Business, Corporate & Startup Firm 25 Broadway Fl 9 New York, NY 10004 (212) 256-1877 www.FisherStoneLaw.com

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