No Money, No Problem — 6 Ways to Get Capital for Your Startup
By: Luba Yudasina
Tags: Startup Lessons, Startup, Venture Capital, Fundraising, Scaling

No Money, No Problem — 6 Ways to Get Capital for Your Startup

Some common ways to approach scaling your business

If you are considering raising extra money for your startup, here are 6 ways to get investments and turn your business into a multi-billion dollar corporation!

I spent the last 6 years in Silicon Valley working for companies like Yelp and Airbnb, being surrounded by founders on one side and Venture Capital investors on the other. The Silicon Valley dream is to start a company which:

Has a mission is to change the world

Has the potential to grow into a multi-billion-dollar company

Impacts the lives of millions (or ideally, billions, of people)

Has the potential to raise impressive funding rounds from the most reputable VC funds (like Sequoia, a16z, or Founders Fund).

Annie Spratt at Unsplash

However…

Getting money from VCs is only one of the ways to get funding. Let’s explore it further.

There are funds that focus on a specific company stage (early stage, series A, B, etc) and multi-stage funds who diversify their portfolio across companies’ tenure.

Venture Capital investors are making a lot of bets, which is expensive. Funds are looking for a high ROI, to cover their previous losses and to get a return to the LPs who invested in the fund. For example, if you had invested $10,000 in Uber in 2010 it would be worth $127.5M today (!).

VCs not only give you money, they ideally give you support and the network. Raising capital accelerates your growth and an opportunity to conquer the market quicker.

But keep in mind that taking venture capital means signing up to scale and grow rapidly, as VCs are looking for some exit for your startup within the 10 year period, which might not be right for every team and business.

It’s important not to disillusion yourself with VC money. Sometimes venture capital is necessary for your success as a startup. But sometimes it might be a trigger on the road to failure.

Startup team at Unsplash

2. An alternative to VCs is bootstrapping your business. You don’t need venture capital to get started in most industries to solve a real problem for customers and charge money for it. Here are three ways to think about this:

Bootstrapping a startup means starting lean and without the help of outside capital. It means continuing to fuel growth internally from cash flow produced by the business. Quite a few famous companies opted-in for this path and scaled billion-dollar ventures. Spanx, GoPro, Github, just to name a few. You are forced to immediately start thinking about how your business will be making money. It’s sometimes disappointing to see that profitability is almost the last thing some companies think about — they comfortably continue burning through VC funding and might end up dying without figuring out how to make their business model work.

Bootstrapping certainly has pros like staying in control and dictating the direction of the business, but it also comes with certain cons, such as lack of capital to grow when you really need to, no access to the support network that could come through going to an accelerator or raising VC money, and of course, the risk of burning through your savings.

Danielle Maclnnes at Unsplash

3. Accelerators are also a path to get funding and accelerate your startup; some of the most famous accelerators include YC, 500 startups, and Techstrars.

An accelerator is a 3 to 6 months program meant to accelerate your startup. Accelerators are not technically free, depending on the way you look at it — they offer you funding for a % of your company.

Accelerators typically offer seed money in exchange for equity in the company. This may range from $10,000 to over $120,000. For example, YC takes 7% equity for 120k. Accelerators can be great. They provide a high-pressure environment, peer support, and mentor network support to help you grow your company. And usually, accelerators have a “demo day” where you would present your startup to get noticed by potential future investors.

It’s important to have an action plan and a clear “why” for joining an accelerator — you must be committed to the idea, understand that you are giving away equity, and ensure that this is the right accelerator for your specific startup: look at the team running it, make sure it’s the right set of mentors and the program can give you the right support.

Faria Anzum at Unsplash

4. Another way to get funding for your startup is to turn to angel investors.

Angel investors are accredited individuals who support founders and usually write checks between 5 to 100k. Angels primarily invest in pre-seed and seed companies and are focused on qualitatively evaluating an opportunity: the founding team, their interest in the space, etc.

5. Crowdfunding has seen a rise in the last decade. Oculus, Larian Studios, Pebble all had their kickstart through crowdfunding. I believe we will see more and more influencers crowdfunding their ideas — they already have the needed reach to get their projects funded.

Crowdfunding could be great if you’re trying to prove a concept or test the demand. It does go without saying though that platforms like Indigogo and Kickstarter mostly offer a payment collection gateway: success of the campaign still hugely depends on the work you put into spreading the word about it.

6. Last but not least, I want to cover grants. A startup small business grant is monetary funding from the government or an organization that is given in order to help small companies and nonprofits succeed in building and growing their business.

Unlike loans, you don’t have to pay this money back. It may come with rules that dictate how you can spend it.

To conclude, there are a lot of paths you can take to get capital for your business. The most important thing to keep in mind is to optimize for your business, your goals, how you want to grow the business, what you want the exit to look like and basing your decisions off of these factors.

P.S. I also made a YouTube video about this topic. You can check it out here: https://www.youtube.com/watch?v=kYeTtcER99o