If your business is growing, it has a bright future. Growing, however, does not come cheap. Whether you’re a new entrepreneur or have been around the block a few times, you probably know that raising money isn’t easy.
That’s why 77% of startups rely on personal savings to get the ball rolling, and a third of them start off with less than 5k in the bank.
Most people assume that fundraising is only for nonprofits and charities, but nothing could be further from the truth. Plenty of for-profit businesses, both large and small, regularly reach out to donors and investors for an extra boost.
You don’t have to go it alone, since there are effective fundraising methods that can bring in extra revenue for your business.
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If you inspire people to have faith in your business, they’re likely to invest in your vision. Finding investors is one of the most effective fundraising methods for businesses, but not all are the same.
- Angel investors are entrepreneurial folks with a high net worth who offer financial backing to help get your business up and running. Unlike other entrepreneurs, angel investors contribute mentorship, guidance, and funds to an early-stage business that does not yet have demonstrable growth, often in exchange for ownership equity in the company.
- Venture capitalists contribute capital to your business if it boasts high growth potential. When your company has a serious edge on the competition and is ready to make major waves, these are the people you want in your corner. VCs nurture your company by taking part in ownership of it in exchange for providing impressive funds that are a lot higher than what angel investors typically offer.
2. Vendor Financing
Vendor financing is an alternative funding option if your business needs certain products or services to operate and doesn’t have the cash to cover those costs. By establishing a long-term relationship with a vendor who believes in your company, you can obtain capital from that vendor in order to purchase their products.
Like a long-term loan, vendor financing will include an interest rate. If there are pieces of inventory that your business just can’t go without, however, this is a solid financing route to explore.
Never underestimate how well-attended events can raise revenue for your company by bringing together communities and supporters. From neighborhood walkathons to intimate cocktail hours to major galas with raffles and auctions, hosting an event gets your business noticed in a big way.
Participants get together, make friends, network, enjoy snacks, and have a good time–all thanks to your generosity. Charge guests to attend your event and, in the case of walkathons or tournaments, they’ll pretty much do all the fundraising for you.
Pro tip: Don’t forget sponsors! Reach out to businesses in your area and ask them to get in on the action. For example, they can contribute directly, or donate products and services for you to auction off. You can also team up with local charities and pledge to donate a percentage of your event earnings to their cause.
4. Government Grants
Whether you’re aiming to start or grow your company, a helpful fundraising solution can be found in government programs. Federal and state agencies in the US have an impressive history of generously funding small businesses with grants, loans, and tax incentives. The best thing about grants is that they don’t need to be repaid.
This is an especially smart option if you’re in the research and development field, are a minority-owned or green business, or work with rural communities. Maybe, thanks to Covid, your business had to shut its doors for the past two years or took a massive economic hit. When you need to weather rough waters, applying for a small business grant can be just the ticket.
Crowdfunding is a smart and effective business, fundraising idea. Why? Because it leverages all the perks of the internet to connect your awesome business vision to millions of potential donors across the globe. To take advantage of the power of crowdfunding, you can set up a page on a funding management platform like RallyUp, Kickstarter, or GoFundMe.
Use your page to amplify your brand voice and inspire masses of people to support your dream in return for an incentive. The bigger their investment, the bigger their reward. It’s a win-win.
Launching a crowdfunding campaign is easier to pull off than more conventional fundraising methods since it doesn’t require drawing up business plans or hosting elaborate events to attract donors or high-net-worth investors. Best of all, crowdfunding secures capital by giving people from all walks of life something to really get excited about.
Tips to Get You Started
- When you’re reaching out to investors, hosting a fundraiser, or leveraging the power of crowdfunding, you need to know exactly what you need to raise, so make careful bookkeeping a priority. Start with a spreadsheet listing your expenses. This will help you set a solid budget.
- If you’re applying for grants or approaching high profile investors, have something concrete to show. Always be armed with a detailed business plan, a convincing pitch, and evidence of impact.
- Don’t forget that everyone is a potential donor or investor. Yes, everyone! This means that your employees, colleagues, clients, and other businesses all count, so don’t overlook your professional network. While approaching family members or friends is an option, it can get tricky fast. So, be thoughtful about accepting their support, and no matter how close you are, keep your pitch professional.
- One of the biggest fundraising mistakes businesses makes is approaching the wrong donors at the wrong time. To fundraise intelligently, assess where your business is and connect with supporters from there. If all you have is an idea on a whiteboard, angel investors are the way to go. If you’re a little further along, you can consider approaching venture capitalists or sponsoring fundraising events. Crowdfunding can work wonders at all business stages. To grow, begin where you are.
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