Alternatives to Venture Capital Funding
Part of the Venture Capital For Dummies Cheat Sheet
Venture capital is a unique way of getting funding for your company. Because venture investors look for companies that are growing very quickly and can make several times the initial investment for the investors, venture capital isn’t right for every company. Fortunately, growing businesses have plenty of other ways to find funding. Here are just a few of the other ways you can get capital:
Debt: Many different kinds of debt are available for growing businesses: business loans, government-backed Small Business Administration (SBA) loans, and factoring loans that are backed by accounts receivable (in these loans, you sell the business’s accounts receivable to a third party at a discount).
Friends and family: Your friends and family are watching you create and grow your business. Chances are they are proud of you and want you to succeed. If they have the means, they may be interested in financially supporting your venture.
Angel investors: Angel investors are like venture capitalists in that they invest in early-stage companies to get a large return on investment. Unlike venture capitalists, who fund businesses by using other people’s invested money, angels work with their own money. As a result, angels have a lot more freedom to invest in non-standard ventures.
Crowdfunding: Crowdfunding is a great way to pre-sell your product before it’s ready to ship to customers. For businesses, crowdfunding doubles as a way to get paid to market your new company or product.
Growing organically: When you grow your company organically, you take out only what you need to survive and put the rest of your profits back into the company as an investment. The bigger you can grow your company, the more money it will return to you in the future.