Ideas don’t get funded and neither do business plans. Investors are looking for startups with a proven product market fit and demonstrated evidence of the founder’s ability to run and grow the business.
The bigger challenge, however, is to get that initial funding to hire a software development company to build a web app or a mobile app.
Here’s some data from National Venture Capital Association on how entrepreneurs funded their startups in the last year.
Not everyone, though, has a large pool to dip into in the initial stages.
But did you know that the source of your seed capital can be sitting right in the corner of your house? The seed capital can be from various places, such as from family & friends, or by exhausting your credit card limits.
Pro Tip: Before Raising Money
Before you’re funded, don’t spend thousands of dollars building the app. Instead, validate by creating a prototype of the app. That prototype is useful to get validation from customers as well as pitching to investors.
Once you’ve gotten past the initial validation, hire developers or a custom software development company to build out your tech platform, website or a mobile app.
So, here are 23 (and a half) clever funding ideas which can get you started with your business idea.
#1 Keep an eye on campaigns by big brands
Huggies ran a campaign called MomInspired in 2012. They called for applications from all the ‘Mompreneurs’ who are residing in the United States and are 21 years and older – with an original, innovative and viable new product idea to help make life easier for parents. The prize was $15,000 and advice to help make their business dreams a reality.
Pepsi Co. ran a program called PepsiCo10 program wherein they invited startups to apply with their app ideas. Pepsi evaluated proposals based on an applicant’s ability to partner with PepsiCo brands and commercial viability.
The winners were then offered an all-expenses paid trip to New York City for an opportunity to meet PepsiCo’s marketing leadership team and network with US-based digital influencers.
Latest one in this list is #UberPitch, an initiative by Uber wherein startups get an opportunity to pitch in their innovative business ideas to VC’s while having a Uber ride with them. Uber partnered with Google Ventures for this initiative.
#2 Win those startup competitions
Jennifer Reich of The Mommy MD Guides created a short video and won a great contest by Office Depot called Survival of the Smartest, for small businesses, which awarded her a very generous amount for her office supplies.
#3 Reach out for University funds
Most of the startups are ideated in college life. Look for funding from that day itself.
The University of Waterloo offers a Velocity Fund, which is a non-equity grant program for startups that offers more than $400,000 each year to local startups. Stanford University also invests directly in students’ companies. Stanford also gives a $3.6 million grant to StartX, non-profit startup accelerators for Stanford-affiliated entrepreneurs.
Some universities may partner with the private sector and investment community to offer seed incubator or accelerator programs also such as University of British Columbia’s entrepreneurship@UBC Accelerator Program.
#4 Negotiate an advance from a customer
Selling your products before they launch is an often-overlooked and highly effective way to raise the money needed for financing your business.
Find a major customer, or a potential business, which sees such value in your idea that they are willing to give you an advance on royalty payments to complete your development. Variations on this theme include early licensing or white-labeling agreements.
#5 Get the office equipment financed
This is called vendor financing. Getting finance for tangible assets is a lot easier than a cash advance on future sales or a personal loan. If you need tangible products for inventory, many manufacturers and distributors can be convinced to defer your payment until the goods are sold by you.
This really means an extension of the normal 30-day payment terms to a period of months or longer, depending on your credit worthiness and extra fees. This frees up valuable capital that can be used for payroll and other marketing expenses.
Many equipment finance firms offer 100% financing on everything a startup needs, from servers to computers to filing furniture and fixtures.
#6 Apply the pay to work policy
If you have a great business idea, you can ask people to make a donation in return for a position in your startup.
Joanne Lang of About One, evaluated team members according to their willingness to invest – given their circumstances. Founding members who invest and show commitment to the venture were pushed forward in management hierarchy.
#7 Barter your services for office help
Barter your skills or something you have for something you need. For example, if you feel your product/service is some value to the landlord, you can negotiate a free office space in exchange for a free service.
Carolyn Goodwin of Cake Communications, suggests, “Try finding a partner outside of your industry and not a direct competitor. Offer something of benefit to them such as, co-marketing opportunities, blog writeups, customer referrals in exchange for funding, support, or access to resources that you need for your business.”
Ask people/potential customers to fund your business. In exchange, signup customers at a discount, or exclusive support, or offers for early birds.
Platforms such as Kickstarter, Indiegogo or Go Get Funding are great resources where you can create your crowdfunding campaign. In 2014, Kickstarter had 22,252 projects raising a total of $529 million and Indiegogo enjoyed a 1,000% increase in funds raised over the past two years.
Here’s an infographic from Fundable which shows the data of successful crowd funded projects:
#9 Ask for some local help
Check with your state, county and municipal economic development offices for funding your startup. The SBA offers Small Business Development Centers, located around the country, that can help connect entrepreneurs with investors.
These institutions have an interest in helping businesses succeed to boost local and regional economies. Depending on your location and the type of business you start, these agencies might offer financial resources, including loans and grants.
#10 Peer-to-peer lending
This is a process whereby a group of people comes together to lend money to each other. It’s been around many years, in examples like small business groups or ethnic groups supporting similar efforts.
In the startup context, look for a successful entrepreneur peer willing to fund similar new ideas.
#11 Test your business idea on social media
Bill Gandy’s has been sharing historic photos of Allegheny City, a community on the north side of Pittsburgh on his Facebook page. After the appreciation of his Facebook group he thought of opening a gallery to showcase these photos.
Thus he launched the non-profit Allengeny City Historic Gallery. Bill raised more than $12,000 in funds for the gallery in less than a month. Strategic roadmapping is a good way to test your business idea as well.
#12 Create interesting content
This story was reported in Reason Digital. During summertime, a 9-year-old Caine set up his arcade shop with a few cardboard boxes he set about building one in his dad’s auto-repair shop.
Unfortunately, the shop didn’t get many customers, until a customer called Nirvan Mullick, stopped by and loved Caine’s arcade. He decided to make a film about it and the film became a social media success.
After that, people from across the globe visited Caine’s arcade and a fund was set up to put him through college. The fund quickly smashed its target of $25,000 and got over $200,000.
Another one, Priska Diaz wanted to fund her invention, a baby bottle called Bare that offers air-free milk, so she created a website showing the concept with pictures of bottle prototypes.
The concept earned her an extensive social-media following as potential customers awaited the product’s development.
She set up a system for preordering and hosted a presale directly from a website, raising more than $50,000 for her company Bittylab.
#13 Start as a side-project
Entrepreneur Alex Genadinik used his revenue from tours he organized on ComeHike to launch Problemio, which builds mobile apps for planning and starting a business.
Our co-founder, Rahul Varshneya wrote a post on ‘How Side Projects Can Be Your Path To Entrepreneurship’. In his post, Rahul mentions, “Side projects are extremely easy to start because you don’t have to depend on them to make a living. You’re probably already earning a salary through your day job. So, you don’t have to worry about an income source even if you were to fail.”
#14 Get funding as your birthday gift, literally
In 2008, as Cynthia Kersey, a divorcee who neared 50, wanted to pursue her dream idea of securing a child’s right to education. She threw a party for her 50th-birthday and invited everyone she knew.
She asked each guest to bring, in lieu of gifts, $100 and announced that she would use the gifts as seed money to open her Los Angeles non-profit, The Unstoppable Foundation.
#15 Cut down on luxuries
Over 90% of startups are self-funded (also called bootstrapping). It may take a bit longer to save some money before you start and grow organically. There is no better way to say it, ‘Take a sharp cut on your luxuries.’ Most business owners to who bootstrap their startups, cut down on their expenses to save and invest that amount in the business.
#16 Sell that additional stuff
Most people have unused stuff just sitting around the house. This can be a great way to get started with your seed fund. Listing any unused items on Craiglist or having a garage sale can raise the capital needed to get started.
Brandi Hamrick of You Grow, Girl, says, “When I first started my business and needed cash, I would sell stuff on Ebay. My closet would be clean and I would have more cash to put into my business. Sell last year’s handbags and clothes on Ebay, and use Craigslist for bulky items such as furniture and appliances. You can even host a neighborhood yard sale.”
#17 Have a big house? Let it out!
Fay Johnson, founder and editor of deliberate LIFE magazine rented out her apartment to get started on her seed funding. Fay listed her San Francisco apartment on Airbnb and started renting it out for anywhere between five nights and a month at a time. She used the money raised to fund the costs of the first few issues of her magazine.
The founders of Eversnap did the same thing.
#18 Second mortgage
Have a house on loan? Second mortgage can be an option to raise funds. They are also referred to as home equity lines of credit. These loans tap into the locked up equity you may have in your home. To calculate how much you may be able to borrow for a second mortgage take the value of your home and deduct the value of any outstanding mortgage.
19 Self Employment Assistance
This kind of financing is often overlooked. SEAP (Self Employment Assistance Program) is part of unemployment assistance and can be used by those who are recently unemployed and interested in starting their own business.
The Labor Department’s Self-Employment Assistance Program is a joint Federal/State effort that helps unemployed go back to work with their own business. You get the support of experienced mentors and an income security of unemployment insurance (UI) benefits.
#20 Online lending
U.S. Treasury Secretary Larry Summers said at the ‘2015 Lend It conference’ that he expects online lenders to eventually reach more than 70% of small businesses.
Online lending services such as OnDeck and Kabbage have become a popular alternative to traditional business loans. Online lenders have the advantage of speed. An application takes only up to an hour to complete, and a decision and the accompanying fund scan be issued within days.
#21 Government funding
There are government funds allocated to support new technologies and important causes, such as education, medicine, and social needs. A good place to start looking is Grants.gov, which is a searchable directory of more than 1,000 federal grant programs.
#22 Retirement funds
Investment Retirement Account funds and 401(k)s are an accessible alternative funding source for startups. You can’t use your own self-directed funds for your startup, but many others are willing and able to loan you money from theirs, for the right terms, if they believe in you and your cause.
Debra Cohen of Home Remedies of NY, Inc. took a $5000 loan from her husband’s retirement savings plan. She got 5 years to pay it back at a minimal interest rate.
#23 Spread some love
Small Business Local Buzz is a website, hosted by Intuit, that gives companies the chance to earn grants from $5,000 up to $25,000. They award 15 small business with $5000 worth of marketing buzz to get the word out.
You can participate by entering and sharing your submission with friends and fans. if you encourage them to vote for your entry it can help you win big buzz!
The eligibility is criteria is, you must be over 18 years old, must own a small business, defined by having 50 or fewer employees, and your business must be in the U.S.
To submit your business, you can visit the Small Business Local Buzz website and click ‘Enter Now’ on the homepage.
And once you’re ready to build your software, get in touch with us for a free quote. The contact link is on the top right of this page.