The most challenging (and in many ways, most crucial) aspect of running a business is securing funding – especially as an entrepreneur. Seeking funds from venture capitalists and angel investors is only the tip of the iceberg. Creative funding solutions present less competitive opportunities and are more in line with entrepreneurs’ visions. Here are a few viable means of obtaining capital outside of traditional investors.
1. Crowdfunding
Platforms like Kickstarter, Indiegogo, and GoFundMe allow business people to seek funds directly from the intended consumers or users. A compelling campaign can get the target market to pre-order products or services, secure new customers, and gather information on their opinions about a product or service. Consequently, the augmentation of Wefunder, SeedInvest, and other equity crowdfunding platforms that allow people to invest in the company for equity makes this method an adequate replacement for other fund sources.
2. Revenue-Based Financing
Revenue-based financing (RBF) is one of the main funding alternatives for enterprises with predictable cash flows. In this setup, the firm gets a cash sum upfront in return for a fixed fraction of its future income until the total figure is paid off. RBF does not use a fixed payment structure like traditional loans, where payments are set regularly.
3. Strategic Partnerships
Partnering with similar, more significant organizations can secure more funding and resources. For example, a technology company focusing on producing technology-based products may offer to work with a hardware company to invest in technologies. Other benefits commonly include sponsorship, provision of partnership or sponsorship scholarships, and key selling channels.
4. Grants and Competitions
Several government bodies, nonprofit organizations, and private enterprises award grants to support startups and small businesses. Some even run business competitions for them. The capital from the grant or competition wins provides vital capital, and the recipient is also validated and has increased credibility and visibility. Examples include the small business and innovation research (SBIR) grants in the United States and the Horizon funding program in the European Union.
5. Bootstrapping and Pre-Sales
Without external funding, one can kickstart bootstrapping by recycling profits back into the business. Additionally, to improve both cash flow and to validate the business model, it may be beneficial to accept pre-sales, i.e., advance payments from customers for products or services.
6. Community Financing
Entrepreneurs have access to valuable equity from local communities and networks. These include cooperatives, community support enterprises, and local investment opportunity networks (LIONs). These organizations pool resources to support businesses they consider suitable for their neighborhoods.
Entrepreneurs can attain the necessary funds without complete dependence on traditional investors. Each financing method has substantial differences, as each brings advantages, such as market testing and independence. It gives founders the ability to create viable businesses that are consistent with their core values.