How to Finance Your Startup

You conceptualized and planned; then prototyped and tested; now you’re finally ready to launch your startup. One thing is missing…money. Starting a small business takes funding– lots of well-planned funding.

According to Forbes, 29 percent of startups that fail do so from a lack of funding. For many, that statistic alone is enough to keep them typing away at their desk job. So what do you do when your trust fund is fresh out and the lottery keeps coming up bust?

But you know there’s no place for fear in starting your own business, and you’ve decided your idea is good enough to relinquish you from the tethers of your nine to five. You’re at the crucial point of finding funding, but unfortunately, your trust fund is fresh out and the lottery months away. What do you do?

Find an angel investor

The difference between an investor and an angel investor is the halo they receive when they hand over their financial support with little proof of the startup’s success. Angel investors invest during the early stages of a company with little sales or history for them to bank on. They take big risks and for it, they receive a heavenly status from the small businesses they take under their angel wings. But how do you convince an angel investor to, well, invest?

With the startup craze of the new millennium, you have to be unique. Your product or service needs to be new and exciting, and your presentation needs to be even more cutting-edge. Here are a few ways to do this–

  • Make sure you’re passionate. A good idea isn’t all it takes anymore. These investors are being wooed left and right and they won’t be excited about a good idea if they sense your motive is solely money.
  • Don’t waste their time. Know your market, your numbers, and your target goals. Be succinct in your presentation while giving them all the details they need.
  • Make it experiential. Give them a real taste of what they’re buying into. Whether it’s a product or a service, show them an abridged version to hold their attention.
  • Know your angel. If you’re pitching to Daymond John, Founder and CEO of clothing line FUBU, your presentation should be drastically different than if you’re selling to Marc Randolph, Co-creator of Netflix and tech startup mentor. Pick an investor who is savvy in your industry. Not only will they be more likely to fund you, but they’ll also be able to mentor you.

Attracting an angel investor puts you in a vulnerable but profitable position. You are opening your business up to another person and their opinion. If this is too much for you and your baby try a different approach.

Cut your costs until they don’t exist

This funding method is the hardest to figure out, but if you can, your company WILL be a success. Instead of getting big checks from big-name investors, try to minimize your costs. Take a look at your product/service and its industry with fresh eyes and determine what you can eliminate to cut costs and expedite your process. This is where true innovation is born.

Jonas Kjellberg did this very thing when he co-created Skype. He looked at the phone/video conference technologies and realized that by using the internet server the company could avoid telecommunication costs altogether.

Uber is another example of cutting costs, by requiring their drivers to use their own vehicles they avoid buying and maintaining cars. Not only will you save your company money by cutting costs to zero, but you’ll probably flip an industry on its head.

Raise money

Family and friends are a common source of funding for small businesses, but this comes at the risk of damaging relationships. It’s always an option, but there are other ways to raise money, like crowdfunding.

There is a multitude of different crowdfunding sites, all with their own limitations and stipulations. is a popular site where you ask for a certain amount of money within a specific time frame ($15,000 in 90 days), and in the end, it’s all or nothing. Crowdfunding is great for a one-time nest egg, but it’s not viable as long-term funding.

Borrow money

It could be as easy as finding a low-interest credit card (if you and your credit score are friends), or as substantial (and daunting) as a bank loan. With banks still wary of chancing their own money, you’ll want to get a Small Business Association- back loan. There are a few requirements you must meet, so check and see if this is a viable option for you and your company.

If you do struggle with credit, an option for you would be a microloan from a source other than a bank. Microloans range from $5,000 to $35,000 and are generally so insignificant to a bank they won’t even bother with them. A microlender is a non-profit organization that is more flexible than a bank but often charges higher interest.

Sell something extra

While you’re focused on selling the product/service you’ve centered your company around you may have forgotten there are other valuable commodities hidden in your business. Take a lesson from MoviePass, the subscription-based movie-ticketing service that is disrupting the industry. People are going crazy trying to understand how a company can be sustainable while offering thirty movies a month for $9.99. Yes, they have major investors, like Helios and Matheson, but they also make a large portion of their profits from selling the data they’ve gathered on movie-goers behavior.

If you are able to find an added value to your company (consumer-behavior is always valuable) you may be able to fund your startup.