5 Unconventional Ways You Can Raise Capital for Your Startup Without Taking a Business Loan
Do you want to raise capital for your startup? I bet you do! I have lost count of the number of people that have met me in the past few months, who desire to start a new business but couldn’t. Most times the problem has always been about how to raise capital. And just when they finish whining about that, they conclude by telling me that they can’t even afford taking a business loan either because the interest rates are too high or because they don’t have the collateral.
The conversation usually goes like this:
“Toby, I have a great idea for a new start-up. It is going to be great. I have done my feasibility studies, and the market is just waiting for me. I already have some prospective customers asking when I will finally start because they can’t wait.”
“Wow, that’s super incredible”, I usually reply. “This is fantastic. I love seeing people who are enthusiastic about their businesses like this. So when are you going to kick off?”
“I don’t know bro. I don’t have capital. How I wish someone will just give me some money. And the banks are not even helping matters, I can’t even get a business loan. I just don’t know what to do. . .I. . .I. . . wish. . . there was something I can do.”
Of course the conversation can come in various forms, but the end point is the same. I am sure you get the picture.
(Personally I don’t like business loans.
I have written extensively against taking short term business loans before and I almost never recommend them unless as a last resort. )
These people in the example above usually forget one very vital thing: The most important thing in starting a business is not capital, but a passionate idea. Tweet that!
If you have a great idea and you are passionate enough about it, you will always find a way. Or if there is no way, you will create one.
Do you have a business idea? Do you believe in it? Have you done your research on it to determine if it has a ready market? Have you made all the other necessary arrangements needed for the business?
On the other hand, are you just sitting on the couch watching the telly, eating pop-corn and drinking coke as you whine to every Tom Dick and Harry about how unfortunate you are because you don’t have money?
Don’t be like my friend Abigail (not real name)
Abigail met me some months ago because she needed advice to help make a career decision desperately. She had an admirable passion for Agriculture. I could feel it when she spoke, it was undeniable. Specifically, she planned to go into Animal Husbandry and equally grow some cash crops by the side.
After my conversation with Abigail, I was convinced beyond any iota of doubt that she was born for Agriculture.
I mean, she was not perturbed by the prospect of getting her hands dirty while weeding or taking out the animal wastes. She even looked forward with delight to checking up on her animals in the middle of the night to know how they are doing. Personally, I was baffled and equally impressed because I know I can’t stand farming. I just don’t have the patience for it.
In spite of this, Abigail’s dream was kept on hold because she lacked ‘capital’.
So many would-have-been start-up CEOs face the same challenge as Abigail and they have the same stories too. These chaps allow their dreams to be suspended because they lack funds.
But here in MSC, we don’t do that! We don’t lie dormant waiting for the conditions to be favourable before we take the necessary steps. We start our journeys and adjust our sails on the way. We believe that lack of capital shouldn’t stop our start-ups so we go out there with our business ideas, and make a way where there is none.
If you are new to the MSC community and you lack funds for your new start-up, below are 5 unconventional ways of raising capital for your start-up without taking a business loan:
- Look out for angel investors
An angel investor is simply a high net-worth individual who is eager to invest in new start-ups as a way of helping the future generation of entrepreneurs. These are usually successful entrepreneurs themselves who want to give back to the society.
But you should note that angel investors almost always require an ownership stake in any new business they invest in as a way of compensating for the risk they are taking by investing in an untested business. On the good side however, this makes them available for free mentorship and coaching.
When I asked him about his angel investments in a recent interview, he had this to say,
“I have personally found the journey of entrepreneurship to be incredibly rewarding, and I love to encourage and help others achieve that dream in many different ways. First, we aim to provide a platform that removes technology as a barrier to starting a company, and in the process encouraging more people to do so.
“Second is by investing in other start-ups, like Zenefits, Cruise, Parse and Cue. And third, by creating scholarships at Penn State to encourage others to pick up the entrepreneur’s journey.”
- Do a lot of by-the-side hustling
The fact that you want to start a clothing line business for instance does not mean you cannot offer some freelance writing services by the side to raise the capital needed for your business. Let’s face it, there are a zillion by-the side businesses you can engage in to make extra income while still running your main gig.
I learnt about this by-the-side-hustling concept a few months before I ventured full time into entrepreneurship. I was seriously toying with the idea of quitting my job at that time and had gone for a training program. I still remember the facilitator telling us all to make sure that our hands are always busy working even as much as we tried to build the business of our dreams.
The advice then was, “Make sure that money doesn’t finish in your pocket as you pursue your dreams. “If money finishes” he had said, “both you and the dream will die.”
That was our facilitator. A very practical and experienced consultant in his field. I remember how he admonished that we should even go as far as as selling wares on the street just to make sure that we raise the money that we need. It is like Abraham Lincoln told his son’s teacher, “Teach him that a dollar earned is more valuable than five found.”
This was exactly what the founders of Airbnb did. A few years ago these chaps had nothing but a very passionate idea. Although it sounded silly and reckless, their idea of three air mattresses and a website has become a success story today.
They needed extra funds for their business, and they made maximum use of the then Democratic Party Convention. These young men simply bought some cereal. Next, they designed some special Obama O’s and Cap’n McCain’s election boxes.
Guess what? Those cereals were sold at $40 a box, and they were able to sell 500 boxes which helped them raise an extra $30,000 for their business.
- Look out for Business Plans Competitions and Grants
In Nigeria for instance thousands of youths received millions of naira between 2012 and 2015 in the form of grants under the Federal Government’s YouWin Program. All they needed to do was to have a workable business idea, present it and defend it before a panel. After that, they would receive the capital that they need.
Most of these grants come as business plan competitions. Countless number of businesses has been started with the funds gotten through this means. All you need to do is to stay informed and keep yourself abreast of information related to business plan competitions.
One of the main places you can find such information is in the business section of most magazines and newspapers, and on state government website. For instance New York State lists all the available grants and incentives and grants for businesses regularly.
Or better still, just type in “business plan competition” with your current year and location on Google.’
Example you can type “2016 Business Plan Competition California”. Click on the results you get, and take it up from there.
The good thing about these business plan competitions is that they are educative. In most cases you get free training in the process. But let’s say you don’t win the grant, you will still have nothing to lose if you apply. Moreover, you could get to meet an angel investor who would be willing to invest in your plan.
- Create a friends and family donation list
Some time ago, I wanted to hold a hospital visitation in my city. I visited the only teaching hospital in my state and decided to visit it. I planned not just to pray and encourage the patients, I equally planned to give them gift items like beverages, and toiletries free of charge.
When I concluded my plan I saw that it was going to cost a lot of money. And actually, that hospital visit was the most expensive I had ever organized till date. I was even shocked at the amount of money I spent.
Most of the funds came through friends and family. All I did was to create a list of people in my circle of influence who were working and earning at least a reasonable sum of income. I contacted all the people in my list and asked them for an amount of money which I knew they could easily part with.
Guess what? Most of them gave towards the vision.
Do the same for your start-up
Do you have a large number of people in your family? That is to your advantage. Simply create a family and friends donation list. Write out the names of all the people that can afford to give you a particular sum of money to support for your business.
For example, let’s say the capital you need for your start-up is $5, 000. Simply break it into 50 pieces of $100 each. You will see that it is way easier to get your friends and family members to give you $100 to support your vision, than to ask one person for $5,000.
- Do you have prospective customers that trust you? Get them to place their order in advance
You have a great business idea? Why not look for who to sell it first. Selling is not really all about tangible products. You can even use picture to show your prospects what they can expect from you. If they get convinced enough to buy, ask them to place an order. Then, use their money and get what they ordered for.
I used this formula a lot as a consumer good entrepreneur, and it saved me a couple of times when I had little to no money.
Leon Levy said in one of his Forbes publications that investing other people’s money is the best business one can do. I totally agree with him.
In conclusion, lack of capital should not stop you from starting that great business. The methods explained above are proven methods that have worked for a lot of entrepreneurs including me. They will work for you too.
It may be difficult at the onset, but if you refuse to give up, you will be a wining start-up CEO at the end.
Have you started a business in the past though you had little or no capital? How did you pull it off? Let us know about your experiences in the comments section below.
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