Gaining external investment without showing early traction can be a challenge for many startups and could leave you feeling like there are no options to develop. But there are alternate funding avenues you can take as a startup without looking to Angel Investors or VCs. We look at the best of the rest out there so you can decide if an alternative funding option would work for your business.
Crowdfunding your startup.
With the likes of Crowdcube and Crowdfunder, and famous successfully crowdfunded products such as Oculus VR, Punk IPA, and Monzo, crowdfunding is a great way to secure funds, as well as attracting a customer base early on, and continued support throughout the development of your company. Businesses can pitch on the multitude of platforms available to gain high investments from many investors to get their final total. This benefits from not having to seek a higher sum from one investor.
You can offer an equity stake in the company, or conduct reward-based crowdfunding where a customer may get priority access to your products, free products, or discounts. Creative campaigns are those likely to attract investment and it enables you to test your appetite for your product or idea before investing tonnes of cash. On the flip side, it’s a time-consuming process (what isn’t in the startup world?!) and you’ll need to be confident in your marketing campaign to succeed.
Peer-to-peer lending to grow your startup.
Peer-to-peer (P2P) lending platforms can provide loans from groups of individuals or organisations to startups looking to grow. It means you can access money without having to jump through the rigid hoops of bank lenders which can be attractive to startups unlikely to meet the criteria for a bank loan.
Instead of offering equity or rewards as with crowdfunding, you’ll pay interest on the loan as you pay it back. Peer-to-peer loans are made up of many different investors – private investors and government-run investment. As with crowdfunding, the P2P has a marketplace where investors can decide which companies to invest in so it enables you to test your ideas out and strengthen your marketing and offer if unsuccessful, however, paying interest may apply added stress to your early-stage development
Early-stage and development loans
They do exactly what they say on the tin! Early-stage businesses that are already profitable but don’t have many assets can look to raise development funding. Although easier to attain, interest rates will be higher as the risk attached is more for a lender so be sure you’re confident you can repay before taking this route.
Lease asset finance to furnish your business with equipment.
If your business requires expensive equipment to develop a product to test before going to market, you could asset finance – this offers machines or equipment without having to pay for it first. You can pay for the assets over the lifetime of the lease in installments. Ensure you shop around to find the best deal, but this could help you avoid having masses of equipment you can’t offload if your business changes tack on what machine it uses to develop a product.
There is a multitude of alternative paths to take when looking to gain further funds to grow your startup and these are just a taster of those out there. Do your homework early, and be sure to put aside enough time to go through the processes. You may want to access different pots, and if you’re smart you can keep hold of most of your company while accessing some tasty capital.