6 CLEVER IDEAS TO RAISE MONEY FOR YOUR STARTUP WITHOUT MAKING AN INVESTOR PITCH.

"Fundraising is going to be the death of me!"

That's how I've felt, oh, perhaps 10 times throughout my journey to date as a serial entrepreneur.

Any entrepreneur will tell you that raising money can be the toughest part of starting your own business. While the competition for funds gradually increases each day, your chances of securing investors significantly slim. Of course, finding an investor isn't impossible, but one of the best decisions a business owner can make is to find alternative means that will contribute to their financial success.

 

Tom Walker, President and CEO of Rev1 Ventures, has been helping entrepreneurs build great companies for most of his career. He's formed multiple venture capital funds, founded angel groups, is an angel investor, and has used Rev1 Ventures to help entrepreneurs build great companies by supporting them through the first phases of growth.

Having helped entrepreneurs for years through Rev1 Ventures and with his book, The Entrepreneur's Path: A Handbook for High-Growth Companies, I asked Tom to share a few alternate ways startups can raise funds without having to pitch to investors. Here's what he had to say:

One of the most common misconceptions by entrepreneurs is that they must raise a great deal of up-front capital to succeed. This is simply not true-nor is it usually possible.

So if you'd like to avoid giving up equity before you have to, heed these five tips to move from bright idea through prototype without raising bundles of investment capital.

1. Open your own wallet first:                                                                                                        Tap into savings, home equity, or retirement accounts. It's risky, but don't expect others to invest in your startup if you haven't put some of your own money in. Knowledgeable investors want to see founders show confidence with cash. They favor entrepreneurs with more than "just" sweat equity in the game.

2. Sign up strategic partners early on.                                                                                      There's nothing sweeter than finding a supplier, distributor, or especially a customer who stands to gain so much from your solution that they are willing and able to help foot the bill. This is a planning-for-success bonus play.

“Far better to create relationships and work out the kinks 

while your company is simple and small than to discover 

an issue when you're ready to scale”

If your solution aligns with a B2B business problem that the market is clamoring to solve, there will be potential early adopters who could make a strategic investment if they think you have a chance at relieving their pain.

These companies will be less focused on final returns and more interested in getting your prototype to beta.

Every startup has to sell its stuff. In-house sales teams are challenging to staff and a challenge to manage.

I've seen more examples than I can count of early relationship between startups and strategic partners that turn into something really special that endures for years.

Read: Have you heard about the social network that wants to transform the Speaking Industry around the World?  SpeakersBay.com is set to launch soon!!!  Follow @Speakersbay 

3. Bootstrap.                                                                                                                              Paying as you go by earning revenue from early adopters and managing every dime like it was a dollar is the most cost-effective way to stretch your company's resources-financial and otherwise. Nothing is scarcer than cash (except maybe sleep) when you're starting out. The more you can bootstrap in the beginning to achieve good market validation, the easier you are going to find your path to raising capital.

Bootstrapping Tips

-Hold fixed costs to a minimum:

-Share office services and equipment

-Co-locate with another company or move to a business incubator

-Use the computers and servers you have

-Delay capital purchases

-Lease instead of purchase

-Negotiate fees and terms with all service providers and suppliers

-Treat variable costs like you're spending your own money, which you are:

-Seek trade credit terms with key suppliers

-Save thousands on travel by using smart scheduling or teleconferencing

-Hire interns from local business and/or design schools

4. Pursue non-dilutive capital.                                                                                                     Grants, solicitations, and RFPs may not be a fit for every company, but make sure it's not "yes" before you say "no." Some industries, such as biotech, are especially conducive to federal grants. And don't forget to look in your own backyard. More and more cities, regions and states have grant programs or loans for high growth businesses at low-interest rates.The beauty of these sources is that a startup may qualify for large sums of money, which are milestone driven, which is the way you ought to be thinking and operating anyway.

5. Match capital to milestones:                                                                                                       Too much capital is as bad as too little. Matching capital requirements to achievable milestones keeps the company from giving up equity before it's required and a bonus.

6. Establish a line of credit.                                                                                                         Even if you don't use it, bankers will return your calls once one of their competitors has vetted you. There are no silver bullets when it comes to sourcing early-stage funding, but with the right capital strategy and a concentrated emphasis on bootstrapping entrepreneurs can avoid shooting themselves in the foot.

Now it's your turn. How have you attempted to secure your startup's financial success? Which of these methods have you tried? Let me know your thoughts in the comments section below

Find me on Twitter: @samuelmao

Credit: Tom Walker, CEO, author, and angel investor shares a few skillful ways startups can raise funds without having to pitch to investors.

HOW TO MAKE AN EFFECTIVE MARKET RESEARCH part 3

Knowing What Sells Well Online And What Doesn't?

Let’s go through some examples of Qualification to find out what sells well online and what doesn't-

 

Example 1: 

PRODUCT: Consumer-style Portable Hair Dryer 

Demographic: The basic demographic for this product would likely be women ages 15 and over of all income levels. While men do use portable hair dryers, it’s fair to assume that they are mostly purchased by women.

This demographic is very basic and wide. The product is generally not very expensive, and a tremendous number of people use them.

On the surface, this seems like a Qualified product, but we haven’t done a CIP Score yet.

CIP Score:

Market Segment = 0 points.

This is a Consumer product, not Prosumer or Professional, so this gets 0 points for Market Segment.

Size = 0 points.

This product is well within weight and size limits for UPS, FedEx, and USPS, so it gets 0 points for Size.

Integration = 0 points.

This product doesn’t have to be integrated into anything else in order to work properly. Just plug it in and use it. So, 0 points for Integration.

Visualization = 0 points.

This is a widely used product that most people are very familiar with. There’s no need to “see and touch” the product before buying, the point score for Visualization is 0.

Urgency = 4 points

When we think about urgency, we have to think about how soon someone feels the need to have the product in their hands. Let’s look at it this way: WHEN do women buy a new hair dryer? 

Usually when the one they currently have breaks. 

How many women do you know who are willing to walk around with bed-head while they wait 4 days or more for UPS to deliver their new hair dryer? 

I don’t know any. The woman whose hair dryer just broke wants a new one NOW, and she’s going to scoot right down to Wal-Mart or the nearest drug store and get a new one right away. So for me, Urgency is a big negative impact on considering this product for sale online.

Total CIP Score = 4 points.

In this example, the Total CIP Score for me is 4 points. Yes, I know that sites do offer hair dryers for sale online, but in my experience that’s simply big box stores who have the product in inventory anyway, and might as well list it on their web sites. 

What we’re looking for here is a niche. We’re looking to build an entire web site around one single product niche. 

Do I think I could build a successful online store selling only Consumer Portable Hair Dryers? No, because the Urgency score puts it out of reasonable consideration for me. 

How did I come to the conclusion that Urgency was a factor? 

Because I took the time to think about whom my Demographic is. If my Demographic was mostly men, I might have given this product a lower Urgency score, because men are often okay without a hair dryer for a few days. They just need to know where to find the hair gel and a comb.

 Women, though, react differently in that situation, and that’s why the high Urgency score. 

Even though the Total CIP Score was not a 5, meaning automatic disqualification, it's high enough that it's not worth messing around with for me. 

Read: The Most Important Qualities of an Entrepreneur.

Example 2:

PRODUCT: Build-in BBQ Grill Components

Demographic: These products are the grill, fridge, drawer and shelf components that get built into an outdoor brick or stone BBQ enclosure.

The demographic here is likely a male homeowner who earns a mid to high level of income and does a fair amount of entertaining in his home. He’s currently involved in some type of outdoor home remodeling. He’s probably not doing it himself, since stonework or bricklaying required to build an outdoor BBQ enclosure is a specialized skill. 

The particular demographic that would buy these products is extremely narrow overall. I already know which way this is going to go just by looking at the products and thinking about the demographic, but I’m going to do a CIP Score anyway, because real business owners are nothing if not thorough! 

CIP Score 

Market Segment = 4 points.

This is a Professional product. It has natural gas fittings, so it needs to be installed by a professional even if the buyer knows enough to do the brick or stonework himself, so this gets 4 points for Market Segment.

Size = 0 points.

These are components shipped in separate boxes, so they are well within weight and size limits for US, FedEx, and USPS, so it gets 0 points for Size.

Integration = 5 points.

This product has to be fully integrated into a custom-built enclosure made of completely different materials, so this one gets 5 points for Integration, which is an automatic disqualification.

Visualization = 2 points.

This is a specialty product that will be built into a custom enclosure. However, since I have to assume that most buyers are working with professional installers and have probably seen samples and been given sizes, I would score Visualization at 2 points.

Urgency = 0 points

This is a part of a construction project, and as such there would not be much of a level of Urgency. Most people plan for delivery of components in construction projects when they’re ready, so I score Urgency at 0 points in this case.

Total CIP Score = 11 points.

In this example, the Total CIP Score for me is 11 points. This is WAY over the disqualification score of 5 points.

Read: HOW TO MAKE AN EFFECTIVE MARKET RESEARCH part 1

Example 3: 

PRODUCT: Airline Pet Carrier

Demographic: I see the demographic for this product as about age 25 and older, since people who both own pets and tend to travel enough to bring them along have a more stable home environment than people under 25. Although we’d probably be dealing with more women who would actually use the product, we’re probably dealing with more men (husbands, likely) who would be making the actual purchase. That’s simply because most women tend to defer to men to get the technical details figured out.

Nothing against women, who are more than capable of doing that, but that’s just the way it tends to play out and we have to be honest with ourselves about this research if we’re going to get it right.

This demographic would probably skew a little more toward people without young kids, or kids living at home. People with young kids living at home tend to travel more locally by car for vacations, and they tend to leave their pets at kennels when they travel.

Read:  HOW TO MAKE AN EFFECTIVE MARKET RESEARCH part 2

People who are older who don’t have kids living at home become much more attached to their pets and want to take them everywhere they go.

So, while the demographic would include people 25 and up, the actual buyers probably skew more toward men age 45 or higher.

This is also a product that has an emotional component to the demographic, because of the often close emotional bond people develop with their pets. That means that the likely buyer will often be willing to spend more money to insure the comfort and safety of the pet.

On the surface, this looks like a Qualified product already, but let’s do a CIP Score to be sure. 

CIP Score 

Market Segment = 0 points.

This is a Consumer product, not Prosumer or Professional, so this gets 0 points for Market Segment.

Size = 0 points.

This product is well within weight and size limits for UPS, FedEx, and USPS, so it gets 0 points for Size.

Integration = 0 points.

This product doesn’t have to be integrated into anything else in order to work properly. Let the pet in and go! So, 0 points for Integration.

Visualization = 0 points.

This is a widely used product that most people are very familiar with. There’s no need to “see and touch” the product before buying, the point score for Visualization is 0.

Urgency = 0 points

While it’s possible that once in a while somebody would need an Airline Pet Carrier on short notice for an emergency trip, that’s not reason enough to give this product any points on the Urgency scale. Most people who are getting ready to travel know well in advance, and buy their tickets well in advance to keep their prices down. So I score Urgency at 0 points in this case.

Total CIP Score = 0 points. 

In this example, the Total CIP Score for me is 0 points. This is a perfectly qualified product with regard to Demographic and Points of Failure. 

Learn it and Use it!

Make absolutely sure you understand exactly how this process works.

When you get involved in Market Research, the best practice is to research several different product markets at once in order to choose one new product line for your business. Use this process every time you get into Market Research. It allows you to create a scoring system that can quickly and easily compare the likelihood of being able to sell the product online.

Read:  HOW TO RESEARCH A COMPETITOR

Credit to worldwidebrands.com