Most startup founders believe that their business can’t move forward without the VC funding. This, however, is not true. Though Venture Capital has always attributed to startup success, it is certainly not the ONLY road to victory. In fact there are many other means to raise business capital which every startup should explore initially, to avoid the debt trap.
The one major setback of Venture Capital (VC) is that it sometimes works like a drug that produces the much-needed adrenaline rush for startups And then it can turn into a toxic dependency!
The article narrates 10 innovative ways to raise business capital, which counterbalance the VC-oriented approach. Many startups have already embraced these tricks with satisfactory result.
So, let’s start!
Solve Genuine Problems To Easily Raise Business Capital
In the 1990s, Lynda Weinman entered the tech scene to teach people what she enjoyed – web designing. She noticed bookstores selling web development related resources which were dry, mundane, and run-of-the-mill. Thus, Lynda decided to produce video tutorials to help designers and developers brush up their skills. She built tech assets and a content library, which were so unique that LinkedIn agreed to pay 1.5 billion dollars to acquire stakes in her company.
Sell One-of-a-Kind Products at Your E-commerce Store To Fast Raise Business Capital
Nathan Seidle, an undergraduate student of electrical engineering in 2003, founded SparkFun Electronics from his dorm room. He sold oddball components and DIY electronics kits to a band of engineers who were looking to explore new systems and sensors. Today, Seidle’s e-commerce empire provides employment to 154 people, generating annual revenue of $32 million.
Offer a Tech-Related Solutions to an Existing Problem And Get Noticed Early
There was a time when online money exchange was considered one of the most complex problems which needed a solution. People were eager to find a convenient, fraud-free solution, and they were ready to pay a fair service charge, too. Braintree Payments emerged with an improved tech solution to process payments online. The company, integrating global commerce tools, ran for four years on the revenue it generated. Braintree ultimately raised $69 million from VCs, before an $800 million acquisition!
Self-Reliance Is the Key
Ipsy founder, Michelle Phan, an American makeup artist, started her YouTube channel in 2006 to teach and inspire everyone to master the art of makeup. Within a short span of time, she became an online celebrity with 8.8 million+ YouTube subscribers. Michelle Phan leveraged her YouTube star status to create a subscription box startup, which produced $150 million in revenues. After a while, she decided to raise business capital from VCs to expand her business.
Apply Your Skill Set Smartly to Start a Business and Attract Investors
Jon Oringer was an amateur photographer and a professional software developer. He decided to blend his skill-sets to create a stock photo service with thirty-thousand photos from his photo library. Thus, ShutterStock, a $2 billion company, was born. Rather than jockeying to raise business capital, Oringer relied on his efficiency to become a self-made billionaire.
Look For a Reasonable Funding And Not Millions of Dollars!
Sharp-witted entrepreneurs plan operation models that raise business capital even before product delivery. Take for instance, Will Dean, a former British counter-terrorism officer, who came up with the idea of Tough Mudder, a racing event series. Using his $7,000 savings, Dean founded Tough Mudder, which is today a worldwide phenomenon.
The secret? Dean sold race registrations before launching the actual event. He used the funds to build obstacle courses that test the physical and mental strength of participants. Tough Mudder now generates annual revenue of over $100 million.
Authentic Customer Feedback and Interaction Can be Your Valuable Business Capital Too
Scentsy, in its early stages, was not in a position to spend on ads. They relied heavily on swap meets to sell their scented candles. The job was not a glamorous one, but the insight they gained from direct customer interactions was invaluable to the company’s growth. Scentsy used that knowledge as a business capital to develop products that resonate with its buyers. The company now collects $545 million in revenue per year.
Tap Local Resources and Suppliers to Build Great Products at Affordable Prices
When Nidhi Kapur decided to start Maiden Home, made-to-order furniture business online, she has little idea about furniture designing. She decided to contact furniture designers in New York. Nidhi explained the furniture details and they drew the designs. Then Nidhi got in touch with artisans in North Carolina who were known for their impeccable craftsmanship. She bootstrapped to launch Maiden Home in 2016, with three suppliers on board. Within a short span of two years the revenue surpassed $2 million with a 15% month-over-month growth.
Focus on Building Market Reputation and Money Will Automatically Flow in
Online dating and matchmaking service, Plenty of Fish (PoF), was founded in 2003. The company did not use dramatic means to raise business capital, even when competitor sites were injecting venture capital to introduce flashy graphics and more functionalities.
PoF founders kept things simple. They preferred to use their resources to fight spam and keep the site 100% free. PoF’s reputation was its biggest asset, which helped the company generate substantial revenue through premium memberships and advertisements. Match Group acquired Plenty of Fish in 2015, for $575 million.
Selling Is the Best Way to Raise Business Capital
LootCrate, a subscription box service for nerds and gamers, already had $100 million in revenue and over 600,000 customers before raising any institutional capital. The primary reason behind this success story was selling. LootCrate founders were systematic and efficient enough to collect orders from the first week of the company’s existence. LootCrate used their initial investment to deliver the geeky goods and gaming-related merchandise to its customers.
The companies mentioned above did not raise business capital for a prolonged period simply because they were confident of their business model and its sustainability. They were ready to face the tough time ahead and prepared themselves to work 24×7. Now if you are wondering how they kicked off without any funding then here’s the answer. Most of them bootstrapped while many hit the crowdfunding platforms or approached angel investors for initial stage funding.
Finally when they decided to raise business capital, they had this flexibility to pick up the right investors. They also enjoyed upper-hand in dictating terms related to merger- acquisition.
So if you want to ditch the venture funding route and raise business capital the other way, then you need to be super-confident about your business plan. Be prepared to work much harder and focus on building up a reliable network. You will soon attract investors at your own terms!
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