Starting or growing your business takes a certain amount of capital. It’s not always easy for people, especially new and younger entrepreneurs, to raise money in conventional ways. Business loans can be difficult to secure unless you have a proven track record or substantial collateral to secure the loan. More and more people are now seeking innovative ways to raise capital.
I was recently motivated to research this topic when my own company needed some capital. Fortunately, my partners and I were ultimately able to grow our business without the aid of outside capital by using some of the bootstrapping tactics I summarize below. However, the experience motivated me to delve into some of the newer and more creative resources that are currently available for people who need to raise capital.
Crowdfunding sites such as Indiegogo and Kickstarter are now well known. There are, however, now many different platforms, each with its own particular focus. These include Patreon, CrowdRise, Kiva and GofundMe. If you need to raise capital, it’s worth the effort to research these and other crowdfunding options to see if any are a good fit with your needs.
The mistake many people make with crowdfunding is to think that they only have to post a project and that the donors will find it. You need to raise plenty of buzz before you launch your project. Look for ways to build both an online and offline following among people who would be a good match for your company. This includes not only influencers and potential large donors but also everyday people who might become enthusiastic brand ambassadors for your product or business.
With crowdfunding, video is one of your most powerful tools. You need at least one compelling video on the platform itself. You can also create use videos on your own website and social media pages. You can often gain inspiration by studying crowdfunding projects in a variety of industries, including ones that are very different from yours. Musicians and filmmakers often use creative videos and other tactics to promote their projects. No matter what kind of business you need to raise money for, you still have to think creatively when crowdfunding.
The EB5 Program
The EB-5 Immigrant Investor Program was started by the U.S. government to encourage investors from around the world to invest in U.S. businesses. It provides a strong incentive to foreign investors by providing them with EB-5 visas in exchange for investing in businesses that provide jobs to workers in the U.S. Although this program has been in effect since 1992, it is not widely known.
Because the focus of the program is to provide job opportunities, your business is only eligible if it provides jobs for at least 10 people. To date, the program has raised over $1 billion in capital for businesses. There are two tiers for investments. The standard one requires a minimum investment of one million dollars. For investments in areas with high unemployment, this minimum is reduced to $500,000.
The most common way to set up this type of investment is by creating what is known as an EB-5 regional center, which must be approved by the USCIS (United States Citizenship and Immigration Services). You can also have your project sponsored by an existing regional center.
If you’re interested in raising capital using the EB-5 program, you’ll have to research all of the requirements and find out if it’s the right approach for you. You’ll need to create a business plan and a job impact report that illustrates how the business will provide jobs. You should also consult with an attorney to ensure that the business and investment is compliant with SEC regulations. This isn’t the ideal method of raising capital for everyone, but it’s an alternative worth looking into.
Bootstrapping may be considered an alternative to raising capital but it can also be considered a creative form of raising capital. That’s because it requires you to make your business more profitable while cutting costs in as many ways as possible. I wanted to talk about this process because it’s the primary way that I was able to grow my own business.
Like many people, I had certain ideas about what was necessary to start a business. By necessity, however, I soon discovered that there were more economical ways to do things. You might think, for example, that all “real businesses” have traditional offices, complete with office furniture and lots of fancy equipment. More and more startups, however, are now using alternatives such as home offices and shared workspace. Equipment can be leased rather than purchased.
Many vital tasks can be accomplished with free or low-cost apps rather than by purchasing expensive software. For example, Google Apps for Business, which costs either $5 or $10 per month (depending on which level you choose), provides professional email, lots of storage space for files and documents and access to platforms such as Google Hangouts and much more.
These are a few of the creative alternatives for raising capital. Every business has to find the solution that’s most appropriate. You must consider your experience, the type of business you have or want to start and how much capital you need. You can then research these and other methods and find the one that works best for you. You don’t, however, need to feel that you’re limited to traditional ways to raise capital.