One of our blog readers, Rich McIver, put me on to a post about 25 Alternatives To Venture Capital. Venture capital is not only one of the most difficult types of investment to get for a business, it is not always the right decision to go for as an entrepreneur. While they may bring expertise and contacts, many venture capitalists force you to grow faster than you may be comfortable with and should be carefully scrutinized before you sign an agreement with them to make sure you share the same culture and vision.
Since raising money is always one of the top concerns for young entrepreneurs I thought it would be useful to share some of the tips that Rich gave out.
He touches on the most well known alternatives including: Angel investors, private placement, and IPOs. He also suggests ways for entrepreneurs to bootstrap their companies (one can never have enough bootstrapping ideas!) like:
- Factoring, which generates cash flow through the sale of your accounts receivable to a “factor” at a discounted price for cash.
- Trade Credit is an option if you are able to find a vendor or supplier that will allow you to order goods on net 30, 60 or 90 day terms. If you can sell the goods before the bill comes due then you have generated cash flow without spending any money.
- Customers can pay you up front for your services.
- Leasing your equipment instead of purchasing it outright.
Some other inventive ideas that Rich discusses are:
- Licensing – Sell licenses to technology that is non-essential to your company or grant limited licensing to essential technology that can be shared.
- Launch Customers – Find out if you have any customers willing to fund research and development in exchange for the product produced.
- Sell Some Assets – Find an interested party to buy some of your assets (computers, equipment, real estate, etc…) and then lease them back to you.
Thanks for the tips Rich! If any of you have found other sources that have helped you get funding, I would love to see your comments!
Evan Carmichael
Matthew Toren is an Award Winning Author, Serial Entrepreneur, and Investor. He Co-Founded YoungEntrepreneur.com along with his brother Adam. Matthew is co-author of the newly released book:Small Business, Big Vision: “Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right” and also co-author of Kidpreneurs.
Thank you for the nice post.
I could not find the trackback link on here, but I listed this article as one of my fav’s from last week on my blog. Great stuff! *=)
I like this web site so much, saved to favorites. “American soldiers must be turned into lambs and eating them is tolerated.” by Muammar Qaddafi.