How can startups raise money: 7 Alternates to VC Funding

For startups, (or businesses, in general), it is very important to keep the cash inflow positive. But raising funding is not a piece of cake. In fact, many good products have run out of the money and had to shut down. Although there are options, many startupreneurs are not aware of how they can raise funding other than a Venture Capitalist investing in them.

Sometimes, startups might not have the luxury of time to wait for the right investor deal. Other times, bootstrapping is not helping. So, many startups have to explore other avenues for funding their startup. Here are some tips that can get you time to pitch to investors, while keeping your business cash above the sea level.

1. Sell the Product

For many startups, it is highly unlikely that they may sell the product right away. For example, if you are a content website, you are hiring writers, but you have no source of income. In the meantime you don't get funding, you can provide subscriptions. Offer high-quality content on the subscriptions and keep the amount nominal.

When your consumers purchase your product, they invest in their ease and your sustainability. You can learn that from Wikipedia. It may not be a startup, but the website has been providing content for almost 20 years. It did not charge the readers, but imagine if it would. They were crowdsourced.

That brings us to another option.

2. Crowdfunding

You can get funding from websites where investors can support your business no matter where they are in the world. Just set up a campaign and name a target amount of money you want to raise. Further, create perks for donors who pledge a certain amount of money, such as early access to products, discounts, and so on. You then raise money for the campaign over a specified time. Some websites you would use for this financing method are Kickstarter, GoFundMe, Indiegogo, Crowdrise, and many others.

3. Take loans

Of course, you have to repay it. But there are options- primary and secondary. Ask your family or friends to lend, or take loans from banks. But you have to show that you will earn the money back and repay them. At times, you might even have to give collateral. Usually, bank loans do have legal regulations, which will have to be followed accordingly.

4.  Accelerator/Incubator Programs

These programs run to aid startups in the initial stages. Accelerators offer mentorship, education, and networking resources to startups. On the other hand, Incubators even take an idea stage startup and help it build the idea. The latter also picks up a stake for their aid, but some are also government-funded.

The StartUp India website has many Accelerator/Incubator Programs.

5. Angel Investors

Angel investors are groups or individuals who invest their own money into other people’s businesses. They stand out because they tend to invest in companies at earlier stages of growth and are always on the lookout for the next business to invest in. Many of the biggest tech companies today, including Google and Yahoo, were funded by angel investors. Typically, an angel investor is one who is successful in a particular industry and is looking for new opportunities within that same industry, or other industries.

6. Bring in more parters and bootstrap

Bootstrapping means financing your company by scraping together any personal funds you can find. If you have more partners, you have a chance to have more funds. This will also reduce the hiring cost and improve sectoral expertise.

7. Donations

Yes. Ask your users to donate to keep you working. A year or two ago, I used an app Mirakee, to write. They were ads-free, charged no money, and steadily increasing the team. they decided to ask for donations in exchange for an Angel badge. Cool idea, right? Later they moved to selling ads-free subscription and adding features on the paid versions.

So, you see, VCs (albeit, the biggest) are not the only options for startups to get funding. Now, you have several options. Startupreneurs can consider any of these, depending upon their requirement. Until an investor opens his/her purse, these options may well provide the much-needed sustenance.