By Robin Schaffer | 29th January, 2016
By now you have probably heard about crowd funding platforms such as Kickstarter and Indiegogo. If you haven’t or if you are still a bit fuzzy on the specifics, you can find out more from our previous post ‘5 Steps To Kickstarter Crowd Funding For Your New Idea’. Even though these sites have helped to fund many projects, their success rates (as of January 2014) fall under 50% with about 44% for Kickstarter and about 34% for Indiegogo.
Not all proposed ideas are successful on these crowdfunding websites, so it is important to be fully aware of your options and get a little more creative with financing your product. Here are 5 ways other than crowd-funding platforms to get your idea off the ground.
1. Personal Financing
It may seem obvious, but have you thought about funneling some of your personal savings into your business idea? If it seems too risky for you to invest in your product, then why should anyone else? ‘Putting your money where your mouth is’ shows that you are confident in your idea and it can encourage other investors to put money into the deal. This is often the case when you are trying to obtain seed funding during the initial phases of your business. The proof-of-concept phase can be trying, and you should prove that you believe in your idea more than anyone.
2. Friends and Family
Don’t forget about family and friends. The people close to you are the people who believe in you the most. Many successful business ideas have been made possible by seed funding from family and friends. Borrowing from the people who believe in you is advantageous as it can mean lower or no interest payments. To avoid damaging your relationship with those close to you, make sure that the deal is transparent with open communication and ensure that everything is put in writing.
Dell computers are now a household name, and their CEO, Michael Dell was ranked the 47st richest person in the world on Forbes 2015 List of Billionaires. But how many people know that Dell Inc. was initially funded by its customers? In 1983 Michael Dell began selling PCs out of his University of Texas dorm room. First, his customers would pay in advance, then he would use their money to buy the necessary parts and assemble them, customizing the computers to fit his customers’ needs. This is a prime example of how some people are willing to pay for a product before it even exists; that is, if the product can be customized to fit the consumers’ needs. Make sure to build and maintain strong relationships with your customers, you never know when they might become the best thing that happens to your new business idea.
Ever heard of trade credit? It can be an effective method of financing growth as it is a way to buy supplies now, and pay later without sustaining penalties. This is based on mutual trust between your company and manufacturing services, but for a startup, it may be difficult to convince your supplier to deliver materials without receiving the cash immediately. You can try to win their confidence by presenting them with credentials; i.e. financial statements, a solid business plan, etc.
5. Contests and Grants
There are many local business competitions that reward winners with investments to help finance their startups. This is not only a great way to obtain the funding you need, but it can also help connect you with potential investors and business partners in your area. Keep in mind, however, that these competitions are highly competitive and can be daunting. Think of it like a less intense version of the show ‘Shark Tank’. Also, be on the lookout for government grants, especially if your business focuses on a scientific field or is positioned as a social enterprise, i.e. Tom’s Shoes, Body Shop. There are more advantages than disadvantages to receiving grants, but be aware that some may require you to forego some of your intellectual property rights in order to receive the money.
There are many more ways to finance your business idea, but many of these come at a high risk, such as using credit cards as a source for capital, or may be difficult to acquire such as a bank loan.
If you do have a great idea and believe you can secure financing but are not sure where to go from there, you may benefit from enlisting the services of an offshore manufacturing agency. At Sourcing Overseas, we can help you outsource your manufacturing without the hassle.
Check out Our Services page to see if Sourcing Overseas is right for you and how we can help you build a successful business.