By Kristopher B. Jones, serial entrepreneur and investor
So, you’ve conceived of your startup idea, designed a business model and can’t stop dreaming of an ideal product-market fit. Now you are ready to begin seeking funding through all the traditional means. You’ve read the literature and watched every episode of Shark Tank. You know crowdfunding is hot, while high-net-worth individuals (aka angel investors) can provide a quick shot of startup capital.
However, the hard truth sometimes is that while your idea and brand might truly rock, the funding just doesn’t materialize. Maybe you couldn’t find the right investors and your crowdfunding campaign raised only a small fraction of what you need.
Listen, I get it. I’m a serial entrepreneur, and while I’ve raised tens of millions in angel and venture capital, I’ve heard the proverbial “no” from investors over 100 times.
While startup life is mostly exciting, it’s also daunting having to raise the necessary capital early on to survive long enough to share your story. The good news is that -- whether you know it or not -- there are plenty of alternative funding options out there for your startup, including options you may never have seriously considered or even heard of.
Some of these ideas may come as a surprise to you, but let’s face the truth -- raising capital is hard, period. You therefore shouldn’t count anything out when your venture is in its nascent stages. Check out these five lesser-known sources of startup funding if angel investors and crowdfunding haven’t come through for you.
All Levels of Government
Don’t count out the various levels of government for your business capital. It’s difficult to acquire federal or state funding, even for those of us who are well established in a certain industry.
To that point, remember that if your startup will become a job creator in the area, you may be eligible for state tax credits. In fact, showing how your company will spur your region’s economic development will be vital to getting any kind of government funding at all. You can always resell the tax credits for cash if you don’t need them, but either situation should be massively beneficial to your business.
Chambers of Commerce
Look to become an active member of your local Chamber of Commerce to take advantage of any available micro-grant or low-interest business loan programs. Chambers of Commerce are usually made up of local business leaders who must participate in chamber and community events to be considered for funding. The rewards for your involvement may consist of the aforementioned grants and loans, so don’t count out this avenue of raising capital.
Small Business Development Centers
The federal government’s Small Business Administration operates Small Business Development Centers (SBDCs) across the United States. Many of them are associated with colleges and universities and offer resources such as no-cost business consulting, training and, of course, grants.
For the most part, private foundations don’t offer grants to entrepreneurs looking to start for-profit businesses. Foundations’ realms of grant-giving are primarily nonprofits and social and community undertakings. Nonetheless, some private foundations do offer low-interest loans, tax credits and the occasional competitive grant to women and minority entrepreneurs. Your chances of landing one of these opportunities from such a foundation will be greater if your for-profit business is based primarily in social activism of some kind.
Business Plan Competitions
You can find literally hundreds of business plan competitions throughout the United States every year. Each will be geared toward a certain industry or offer different prizes and awards. In early 2019, for example, Harvard Business School held its annual New Venture Competition, which awards a total of $300,000 in cash to students in either a business or social enterprise track. The prizes may be used for a current or future entrepreneurial pursuit. Check for these kinds of business plan competitions in your area. You’ll find plenty for students and non-students alike.
As an aside to all of these suggestions, I want you to know that my own primary tenet as an angel investor is that I invest in people over ideas. I have outright rejected business proposals from entrepreneurs but then told those same individuals to call me when they had another idea. Why? Because they proved to me that they had the smarts, vision and drive to make their dreams happen.
That’s just an insider perspective on what certain investors may be looking for in an overall startup proposal package. In the meantime, thoroughly investigate these five alternative sources of business capital. Each presents its own unique challenges, but succeeding will be well worth the effort.
Kristopher B. Jones is a serial entrepreneur and investor. Kris recently launched Special Guest App with comedian / actor Damon Wayans, Jr.