Venture capital and angel investing received a lot of attention during the Internet Bubble a decade ago. However, throughout business history, most companies have been built from funds found in many places without using “OPM” (Other People’s Money).
Here are the top 10:
1. Personal bank account.
Most entrepreneurs find part of their new business funds from their own wallet—it is the most common place to get started. This may come from their own savings, money borrowed from their credit cards, home equity or insurance policies. Many companies, especially service oriented business, can actually be founded on less than $10,000. When the entrepreneur risks a significant amount of their own money, it enables them to respect taking “OPM” at a later stage.
2. Friends and family.
This is the all-time favorite place for startup funding. The good news is that friends and family will invest because they love and care about the entrepreneur. The bad news is that it’s not a lot of fun to lose their money and may change the long-standing relationship with this person forever.
3. Find a customer that needs the product.
Traditionally, businesses have started because a person asked someone else to do something and was willing to pay for it. Find that person who will pay to solve their problem and an instant business is born. Profitable customers are the best way to fund any business at any stage.
4. Take to an accountant or attorney to lunch.
They give excellent referrals since they deal with "money" people all of the time. Additionally, ask those referrals to give three more names and so on to build a large list.
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5. Find a mentor.
Find someone that will help spread the word about the business. They should share the entrepreneur’s passion and be another evangelist to the world.
6. Always be making connections.
Attend seminars, go to events, join online LinkedIn discussion groups, Facebook pages, and talk to everyone who listens. A strong referral is the best way to get in front of the right people. Also, keep these people up-to-date on the company’s progress even if their help is not needed at that time.
7. Submit the business plan to competitions.
There are many groups that allow business plan postings on their website. Some will even get it reviewed by potential investors. Don’t worry about them stealing the idea. Remember, business ideas are meaningless. It’s all about execution.
8. Achieve business milestones.
Nothing gets money like business success. Investors want to put their funds in companies that have achieved their targeted milestones. Stop writing the business plan and start executing by getting paying customers.
9. Attract an excellent management team.
Investors put their money in people, not a business. The better the team, the more money the entrepreneur will be able to attract. Get people on the team that have industry expertise. Investors want track records not academic resumes.
10. Contact angel groups and other area resources.
There are several excellent groups that are national and regional in scope. There are an endless number of resources online to help the entrepreneur learn more about attracting capital and funding such theAngel Capital Association and SCORE.
What tips do you have for finding start up funds?