I’ve worked with over a hundred startups, nine of which have become unicorns, and I know that funding is a critical factor in their success – or lack thereof.

In my LinkedIn post Cash is Elvis I describe the importance of positive cash flow for startups. Cash truly is king when it comes to startups. It is the oxygen that keeps your business alive. "Not enough and you’re going to die," as the 70's pop song goes. (Paradoxically, “if you get too much, you get too high,” can also happen, creating an overconfidence/low hustle problem which I discussed previously in my Unicorn Tears LinkedIn post.)

As a founder or a CEO of a startup, you know that funding is one of your key roles in the company. Finding funding can be a daunting challenge, but it doesn't have to be. Lots of alternative funding solutions have recently emerged, unlocking new opportunities for startups, especially with the rise of digital technology.

Alternative funding is a way of financing a startup without taking a loan from a traditional financial institution, such as a bank. It involves identifying investors or financial institutions offering unique types of funding that are less stringent and often more flexible than traditional loans. In this blog post, I’ll discuss various alternative funding options available to startups.

Crowdfunding:

Crowdfunding is an alternative funding solution that has gained popularity in recent years. It involves raising money for your startup from a large group of people through various online platforms. This option of funding allows startups to gauge the market interest in their products or services while securing funding simultaneously.

In addition, crowdfunding is a great way to generate awareness about your startup and showcase your product to a larger audience. Platforms like Kickstarter, Indiegogo, GoFundMe, and Crowdfunder, amongst others, are ideal for entrepreneurs interested in crowdfunding.

Angel Investors:

Angel investors are affluent individuals who invest in early-stage startups in exchange for equity. They offer funding that is usually more flexible, and entrepreneurs also get access to their expertise and contacts. Angel investors are often more willing to take risks compared to traditional financial institutions and can offer guidance to entrepreneurs on running their businesses.

Furthermore, angel investors can also provide valuable mentorship to startup founders as they have experience in building businesses themselves. To get connected to potential angel investors, entrepreneurs may join networks such as AngelList or look for local angel investor groups.

I know a bunch of angel investors and groups in Silicon Valley and would be happy to make introductions for you.

Venture Capital:

Venture capital is funding from a pool of investor money that is managed by a venture capital firm. Venture capitalists are willing to provide funding for high-growth startups in exchange for equity. Venture capitalists also offer mentorship, strategic advice and provide a valuable network for entrepreneurs.

However, venture capital comes with more stringent requirements with regards to profit margins and returns, as their priority is to help startups to scale fast and achieve maximum returns. To secure venture capital funding, startup founders must have a scalable business plan and meaningful traction.

I also know a bunch of VCs and can get you introduced there as well. 😊

Grants:

Grants, which are funds provided by non-profits, organizations, or governments, is also another alternative funding option for startups. Grants could be crucial in financing research and development, marketing, and other business expenses. Some grants do not require repayment, making them ideal for startups that are in their early stages.

Founders may also consider looking for grants from organizations that align with their mission and vision. Additionally, professional development organizations such as SCORE and Small Business Administration may provide resources for entrepreneurs that can direct them towards suitable grant options.

Revenue Sharing:

Revenue sharing is another alternative funding solution that can provide startups the capital they need to grow. It involves collaborating with a business that has a similar target audience and sharing the profits. There exists many variations of revenue sharing, such as Commission based and Royalty based.

This alternative funding option benefits entrepreneurs in the sense that they obtain the funding they need, and the business providing the funding obtains a share of the profits. Such a financial commitment can also be seen as a positive signal of confidence in the startup by the investor.

The Bottom Line:

As a founder of a startup, finding the right funding for your business is no easy task, yet it's essential to properly research and weigh all of your options. While traditional funding institutions like banks may come with stringent requirements that many Startups might not meet, alternative funding options provide greater flexibility for funding your startup. With alternative funding options, entrepreneurs can get creative with how they finance their business, take calculated risks, and unlock growth potential. So, keep an open mind and explore all alternative funding options to ensure your business thrives.

For additional startup tips, check out some of my other posts:

-        Top five software products for startups.  

-        Congrats on getting funded! Now what?  

As always, please reach out to me on LinkedIn or email me. Let’s chat about how we can help.

All my best,

Kim