As any founder knows, finding ways to fund your business isn't always easy.
Venture capital (VCs) is one route, but it may not be an option for everyone.
In 2016 only 16.9 percent of VC funding went to companies with at least one female founder, according to data sourced from research firm PitchBook's platform in 2017. (This is sadly a step up from investments made in black and Latinx companies.)
So what can founders do? I asked five business owners who avoided the VC route to share how they funded their business.
1. Friends and Family
For Lizzie Brown, CEO and co-founder of Yoga Wake Up, and her business partner/husband, working with VCs simply wasn't an option for their app. (Yoga Wake Up offers short, audio-guided yoga and meditations.)
Crowdfunding platforms can help you prototype a new proof of concept or get a general idea for customer demand, and fund your business at the same time.
From high monthly revenue goals to disparaging comments about their product, Brown was given the runaround by several investors, which is not uncommon for women-led businesses.
After trying unsuccessfully to find investors, the the two raised $60,000 from friends and family. They were able to quit their day jobs and scale their company with that round of investment.
Her advice? Tap into your friends and family to help fund your business—especially when you're starting small.
“Those people are investing because they love you and not necessarily because they're expecting a big return, even though it's your goal to get it for them and yourself," Brown says.
2. Local Bank
Rob Riggs, founder and president of Your Design Online, a web development agency based in Atlanta, avoided the VC route altogether because his business model didn't fit the traditional route.
“We're a service company, working typically with other service companies, nonprofits or marketing agencies, and the attention we place on each client may not scale like a VC would want," says Riggs.
Instead, he was able to secure a line of credit through a local community bank.
“They were willing to take a chance on us, and we have used the line of credit solidly for payroll," Riggs says.
Because service-based companies and small businesses aren't always appealing to the traditional VC model, working with a local bank can be a good alternative.
3. Crowdfunding
Jenny Woo is the founder of Mind Brain Parenting, a social and emotional learning game that prepares children and adults for life.
The desire to retain complete company control and be first-to-market, combined with the tedious and time-consuming process of pitching to VCs, led Woo to Kickstarter.
Her campaign was overfunded by 700 percent.
Crowdfunding platforms are growing in popularity, with Kickstarter and Indiegogo leading the way. Collectively these platforms have raised billions of dollars for entrepreneurs which makes them a viable funding source for entrepreneurs to consider.
“For consumer and media products, Kickstarter or Indiegogo are great low-risk platforms for entrepreneurs to get the word out, gather interest and gain funding prior to product—and even service—delivery," Woo says.
Crowdfunding platforms can help you prototype a new proof of concept or get a general idea for customer demand, and fund your business at the same time.
4. Business Accelerator Program
Eric Niu, CEO and co-founder of Swaggle, a mobile marketplace for men's consignment shopping, received its first external funding from a business accelerator program in Baltimore. The 13-week program provided Swaggle with $25,000 in seed funding, but accelerator programs offer more than just money to fund your business.
“We were particularly interested in the accelerator model given its resources, exposure and mentorship beyond the money itself," Niu says.
You can find accelerator programs offered by state and local governments, universities and colleges, nonprofits and private companies.
5. Bootstrap
One of the most popular ways to fund your business is through self-funding. That's the route Tori Gerbig and her husband took. Gerbig is the co-founder and CEO of Pink Lily, an online women's fashion retail site.
“It was important to us that we had the full capability to make executive business decisions, see what worked, what didn't and adapt accordingly before we considered bringing on outside funding," says Gerbig.
The couple worked full time while the company was growing, but the investment paid off. They were able to go all in within six months.
Bootstrapping is also the route I took when I started my business seven years ago. And it's a viable option for many as it allows you to save and scale at your own pace.
Even with little VC support to go around, you still have options. Be open to alternative ways to fund your business and stay motivated.
Read more articles on raising capital.
Photo: Getty Images
The information contained herein is for generalized informational and educational purposes only and does not constitute investment, financial, tax, legal or other professional advice on any subject matter. THIS IS NOT A SUBSTITUTE FOR PROFESSIONAL BUSINESS ADVICE. Therefore, seek such advice in connection with any specific situation, as necessary. The views and opinions of third parties expressed herein represent the opinion of the author, speaker or participant (as the case may be) and do not necessarily represent the views, opinions and/or judgments of American Express Company or any of its affiliates, subsidiaries or divisions. American Express makes no representation as to, and is not responsible for, the accuracy, timeliness, completeness or reliability of any such opinion, advice or statement made herein.