Funding Options for Entrepreneurs
Startup funding can be tricky for founders to understand what is best for them, with so many options like loans, grants, crowdfunding, venture capital, and a plethora of other sources, the process can be overwhelming.
Below are just a few funding options from Faruk Brbovic.
Understanding where your startup fits within the overall ecosystem today and where it can be in a few years can help your decision-making process. Just like funding options, this information won’t be one size fits all but hopefully, it will help guide you in your process.
Deciding which funding route to go depends a lot on your business goals. Now, founders have more funding options than ever.
Now that you know that all of these options exist, let’s dive into the most popular ones.
Venture Capital
If you think you’ve got the next $100B+ company, venture capital may be the right option for you! VCs have to take big bets, for most, it doesn’t make sense to invest in a company that can’t have a very large exit event/ IPO, etc. A company that sells for $2M could be great for a founder that doesn’t have investors, but in most scenarios would not be great for the investors & their overall fund. VC fund managers have a fiduciary responsibility to make the best decision for their LPs (the people who invest in VC funds) so most startups who we don’t see a massive outcome, we have to pass on. It’s usually no fault of the founder and does not mean it’s a bad business, just won’t be large enough for us to make significant returns to our LPs.
Equity Crowdfunding
Equity crowdfunding is still in its infancy, this is a very interesting tool that gives nearly anyone the ability to invest in your startup, not just accredited investors (VCs, Angel Investors, etc). This approach can be exciting if you…
- Have a strong community. Do you have a lot of engaged followers across the various social media platforms? Do they respect the work you do, engage with you, and like what you’re offering? These are some questions to ask yourself.
- Looking for market validation. Market validation is something we hear many early-stage VCs talk about. Do customers actually want whatever product/service you’re selling? If the market is willing to invest in your startup with their own capital, that can be the ultimate market validation. Not only do they believe in it enough to purchase it, they believe in it enough to put their hard-earned money into it.
- Looking for your community to have a vested interest in your success. This may be the ultimate “stickiness” factor. If the community is invested in you, I bet they are more willing to continuously use your product or service, it benefits them in every way. Plus, they’re likely to be brand ambassadors for you! How often do we see VCs hyping up their portfolio companies? Now imagine that on a bigger scale because it’s your customers, community members, and investors!
Revenue-Based Financing
There have been some amazing startups like Pipe & ClearCo popping up in this arena lately, and if you need capital to grow rapidly but don’t want to give away equity, this option could be great for you! Of course, you need revenue for this type of financing to work so if you’re just starting out and still looking for those 1st few sales… keep scrolling.
If you have active contracts, Monthly Recurring Revenue (MRR), or Annual Recurring Revenue (ARR), you can think of it as an “advance” on those revenue streams.
The options for founders looking for access to capital are not limited to the options above. In fact, one of Overlooked Ventures’ partners specializes in connecting founders to non-dilutive sources of capital.
Our Partnership with FundStory
Overlooked Ventures has partnered with FundStory to give founders who don’t get funded by our firm a positive next step.
FundStory is a marketplace for startup entrepreneurs to find non-dilutive capital and manage their funding journey from pre- to post-funding. Founded by Bobby Gilbert, FundStory contains tools for improving fundability and a marketplace to easily compare and choose the best possible funding options.
FundStory specializes in helping you get access to non-dilutive capital. It is not a direct lender, instead, FundStory is a conduit between borrowers and lenders. What is non-dilutive capital?
“Non-dilutive capital is any type of funding that does not require you to sell any equity shares of your company” (FundStory). In other words, non-dilutive capital allows you to keep ownership and it can be in the form of debt, grants, or donations. There are many types of debt, below are just a few examples
- Business loans
- Credit cards
- Lines of credit
- Accounts receivable financing
- Cash advances
Beyond connecting with lenders, FundStory also has tools for preparing for funding and post-funding. The intuitive dashboards for reporting, capital management, and more make it easier for founders to put their best foot forward and secure financing.
Bobby Gilbert is the Founder & CEO of FundStory. Prior to starting FundStory, Bobby worked in the software, internet services, and mobile technologies industries. He’s done everything from strategy, analytics, partnerships, and development, and is co-founder of two consumer-focused startups. More recently, Bobby Gilbert was named a recipient of this year’s Google for Startups Black Founders Fund. Bobby sought out to start FundStory to give entrepreneurs flexibility and control over their companies. While venture capital is a great option, it is not the only option, and it isn’t the best one for every business. By using FundStory, any business owner can find access to capital to achieve their goals while also keeping control of their company.
Overlooked Ventures is excited to be partnering with FundStory and Bobby Gilbert so that we can help as many founders get the funding they need to grow their businesses.
