Creativity reigns when raising capital for your new business.
There are many ways to raise capital for your new business. The key is
to be resourceful and focused on the right things in the process. Every
region in the US has a Small Business Administration as well as an
economic development agency. The job of these groups is to provide
information and resources to new business owners as to capital
availability. They have many relationships and can introduce you to
people with capital formation expertise. They are a great place to start
networking because lenders and investors usually affiliate with these
groups.
Family and friends are a great first stop when raising
capital for your new business. It that option is not available; there
are many angel investors across the US. Angel groups are formal groups
of high net worth individuals who like to invest in entrepreneurial
businesses. Some angel groups have monthly or quarterly meetings which
invite entrepreneurs for presentations. Though the check size is usually
small, angel investment can come together relatively quickly.
There
are technology fairs across the US organized by venture capital
associations. These regional associations usually put on annual or
quarterly events that showcase up and coming companies. A great example
of this is the Smart Start Venture Forum help in Upstate New York every
year. Venture capital events are a great way to show your product and
test your story in front of a large and discriminating crowd. Often,
these events are structured so that each company does a formal
presentation to a crowd of venture capitalists. They receive feedback on
their product and marketing ideas. They events are like beauty pageants
and there are best in show as well as cash prizes for the winners.
Sometime the cash prizes can be meaningful such as $25,000 or $50,000.
Both the experience and the feedback are very valuable for most new
business seeking to raise capital.
Asset based lending is a loan
against your assets such as accounts receivables. There are many
accounts receivable financing companies that will factor your accounts
receivable once you have sales from creditworthy customers. This
provides you upfront cash though it is often a high fee percentage or
interest rate.
Crowd sourcing is a new way of using the power of
the internet to raise capital. This is an emerging trend. This is a good
way to get going if you are at the seed stage but have a very
compelling business opportunity. Typically, crowd sourcing is very
difficult to pull off and the capital raises are small dollars -
generally under $500,000. Crowd sourcing is a technology savvy way of
raising capital for your new business. The downside is that you will
likely have many shareholders and the approach is not necessarily ideal
for larger size capital raises.
Finally, many entrepreneurs are
looking to creative ways of bartering or trading with other companies to
expand their resource base. Strategic channel partners can provide
valuable sales resources which is functionally equivalent to them making
direct cash investment in the business. Many technology development
companies are willing to provide free services in exchange for an equity
position or exclusive contract to provide more services.