5 Ways to Start a Business with Cheap or Free Money - Entrepreneur
Posted: 11 Jun 2019 08:39 AM PDT
Crowdfunding, universities and government programs can be attractive options for people who want to start a business without giving up too much equity.
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You've got the next billion-dollar idea. Or million dollar, or whatever it is. The point is it's good, and you want to prove its value. This is the stage where most startups die -- which is to say before they even get started. Because the most daunting obstacle to seeding the next big idea is capital.
Most first-time entrepreneurs have heard of venture capitalist firms and angel investors. That's how Facebook got started, right? So why shouldn't it be you? The truth is it's extremely difficult and rare for first timers to receive funding this way. In fact, by some estimates, less than one percent of startups are funded by angel investors and a fraction of one percent by VCs.
Problems finding funding to start a business
When looking for outside funding, many entrepreneurs look to friends and family. But do you really have friends and family that are able and willing to shell out $50,000, $100,000 or more to see if your idea is worthwhile? And getting a loan from the bank is a tedious prospect where you may have to put your house or other personal assets at risk. Not to mention there's the other problem even if you do get funding: giving up too much of your company too early. You see a big check, give up 50 percent of the company, and end up regretting it for the rest of your life.
These are problems that are unfortunately preventing many good, innovative ideas from ever sprouting beyond the back of a napkin. But what many entrepreneurs don't know, especially if it's their first time around, is that there is capital to be had without any strings attached. Here are five ways you can seed your company on the cheap, or even for free:
1. Government grants
Did you know that you can find grant money to fund your startup on the federal, state, regional and even city government level? And they won't even ask for equity. While what's offered will vary by geographic location, investing in startups has become an emerging model of how government is enacting economic development. Invest in the next unicorn in the region, and it will create jobs and attract talent to the area.
For example, manufacturing is important to the state of Ohio, wich is why it established the Advanced Manufacturing Program, offering grants of up to $500,000 to promote innovation in manufacturing. Louisiana, a state with a major international port and shipping center, provides grants to small businesses to help increase exports.
These types of focused grants exist in individual states and across industrial sectors, and at both the state and Federal levels. The National Science Foundation, for example, funds about 11,000 proposals a year spanning everything from biosciences to climate-related ventures.
And Louisiana Economic Development's STEP export program offers reimbursement for small businesses that are either new to exporting or primed for market expansion. Eligible businesses can receive over $6,000 for things like exhibition booth fees, travel, and even business-related meals.
Finally, Connecticut's Manufacturing Innovation Fund Voucher Program offers grants of up to $50,000 to help pay for new technology, expertise, and prototype development.
However much money you need, and whichever sector you're in, there's likely a grant out there that could provide seed money to move your idea forward. And while there will sometimes be certain stipulations you'll have to meet (for example, extensive reporting and forms to submit), you'll never have to give up equity or pay back the grant.
You've probably heard of Kickstarter or GoFundMe, but maybe they just seemed like cute platforms for artists. Turns out, Kickstarter has seen over $4.3 billion in pledges. If you need seed money, let's say $20,000 to develop your app, crowdsourcing could be the answer. In exchange, you offer products or services, but you don't have to give up equity, you don't have to pay interest and you've already developed a community of potential customers.
Some crowdfunding platforms have taken the step of specifically funding startups, while others are simply open to raising money for any purpose. Fundable, founded by former entrepreneurs and focused on raising crowdsourced capital for startups, generated over $80 million in funding commitments in just its first year. And Indiegogo, another platform with entrepreneurs specifically in mind, has raised over $1 billion in funding for over 650,000 projects.
Hey, if crowdfunding was good enough for Oculus, the virtual reality headset maker that was eventually acquired by Facebook, it might work for you, too.
While you might think that accelerators only accept you if you give them equity, that's not actually true. There are many programs that offer the same intensive coaching and resources that equity-play accelerators do, but minus the whole equity part.
The reSET Impact Accelerator, out of Hartford, Conn., offers a 4-month, intensive program designed to equip entrepreneurs with the skills and resources needed to scale their startups. There is no cost, and no equity is taken. The only catch is you have to live in Hartford.
MassChallenge out of Boston, is a zero-equity, zero-cost accelerator for early-stage companies across multiple sectors. And not only does it cost participants nothing, but MassChallenge also hands out $1 million in cash prizes. Alumni of the program have been able to verify their products, learn critical skills, build important networks, and have gone on to raise over $2.5 billion in funding.
Take a look in your own backyard and you might be surprised at the programs out there that will help you take your idea to proof of concept at little to no cost.
4. Pitch competitions
Since Shark Tank debuted, pitch competitions have sprung up throughout the country with different prize opportunities. And unlike on Shark Tank, many of them don't result with entrepreneurs having to give up equity or paying back the so-called Mr. Wonderful a bunch of interest. Take the Urban Future Prize Competition out of New York City. Two winners receive a $50,000 cash prize each year, plus automatic entry into an incubator program. While this competition is focused on cleantech, there's likely one in your sector, too, with prizes ranging from $10,000 up to $1 million in some cases.
On the other side of the country, San Diego Startup Week offers multiple pitch competitions for companies at an idea or seed stages, with cash prizes starting at $1,000. San Diego's premier startup event also offers pitch workshops so entrepreneurs can hone their chops before taking the stage. Entrepreneur magazine's Elevator Pitch show offers a wide variety of deal structures for winning pitches.
Universities offer grants and awards for students, faculty, and alumni, as well as offer up resources that startups could otherwise only dream of. It doesn't matter if you're a freshman or a tenured professor if you have a connection to a university that could be your ticket to raising the capital you need without the usual drawbacks.
Life sciences have an extremely expensive barrier to entry for startups, but universities offer the research facilities and can match entrepreneurs with researchers to push their ideas forward. The University of South Carolina even offers its own pitch competition, The Proving Ground, where students and alumni can receive up to $17,500 in cash to fund their idea.
But universities are doing more than just giving out prizes for pitches -- many of them offer full-fledged startup support. The University of Virginia's iLab, for example, provides direct grants, mentorship, an incubator, and even co-working spaces. And Yale University's Office of Cooperative Research has given 18 startups grants of $100,000 each to bridge the gap from early-stage research to the creation of successful biomedical products (which enabled them to leverage an additional $103 million from other funding sources).
Entrepreneurs aren't wired to think about the government seeding their startup, or to consider receiving no-strings-attached money. Their first instinct is to seek out VCs or angel investors, and when that doesn't work, to take on debt with big interest payments attached. These economic development tools can be the key to bringing to life that idea you've been sitting on for a while. After all, with free money, what is there to lose?
Posted: 01 May 2019 12:00 AM PDT
Women business owners are on the rise.
That's according to the 2018 State of Women-Owned Businesses report, which finds that female entrepreneurship has increased by an impressive 3,000 percent since 1972. And between 2017 and 2018, women started an average of of 1,821 new ventures per day.
What kind of businesses are all of these women starting? According to our own research effort, 1,000 Stories, personal and professional services — think dog walking, law and beauty — are frequent choices, as is selling goods online.
So, in honor of National Small Business Month, we've outlined some popular startup ideas with great growth potential. After all, there are ample reasons to start up — seeking work/life balance or financial stability, or wanting to be your own boss — and milestones to work toward, like expanding from a home-based business to having a brick-and-mortar location.
Whatever your reasons or goals, here are some industries you can look to launch in.
1. App Developing
Women are designing apps used by thousands that solve a range of problems — from booking beauty appointments, combating street harassment or safely chauffeuring children to addressing the isolation that new mothers or employees at large firms sometimes feel. Of course, starting up in a male-dominated industry like tech can be tricky for women — just ask Shaan Kandawalla, founder of educational app maker PlayDate Digital. But with a client list that includes brands like Play-Doh, My Little Pony and Transformers, she proves it's possible to find success all the same. Watch her statup video below.
2. Online Retail/Wholesale
The power of technology meets the desire to sell a physical product. We've spoken with women who run websites selling bras, high-end watches, eco-friendly clothing, baby supplies for parents of multiple children, and much more. And many of them are thriving doing so — especially in the case of immigrant entrepreneur Anna Metselitsa, a chance to thrive in a new country. She launched her online boutique, Haute Rogue, not long after arriving in the United States with just $300 in her pocket. Today, she sells thousands of garments each month.
3. Financial Services
Who doesn't need help with money? (Well, probably not you, if this is an industry you're considering). A number of female founders have built sturdy ventures helping artists, retirees, homeless people and more regain control of their finances. In particular, we have seen numerous business owners help their fellow women find financial clarity. Others, meanwhile, found success by looking to the future — like Kelly Peeler, whose fiscal education platform, NextGenVest, uses tech to teach Generation Z about the risks around student loans. Her firm was acquired by CommonBond, a tech company that uses data to lower education costs, proving just how in-demand a financial business can be.
4. Agriculture and Farming
For nature lovers, this could be the perfect startup area. Kristy Allen certainly made it work. Her business, The Beez Kneez, sells freshly made honey and teaches paid beekeeping classes to Minneapolis residents, and makes hundreds of thousands of dollars every year doing so. The Piggery's Heather Sandford is also thriving — her humane pig farm makes millions every year selling bacon, sausage and other pork products
5. Dog Walking and Pet Services
One word: puppies! If you're a dog lover, and wondered how you could turn that into a money-making venture, Becky O'Neil can show you the way. Becky's Pet Care is a multimillion-dollar venture that walks thousands of dogs every month. It also boasts several locations. Despite the parade of cute dogs, the business is hard work. But "it's absolutely a wonderful way to change your life," O'Neil says. (Note: You can also cater to (wo)man's best friend in other ways, like, selling all-natural dog food or offering grooming services.)
6. Cooking, Catering and Restaurant Management
Like tech, the food industry can be tough for women to navigate — just ask chefs Jody Adams and Ana Sortun. They run successful Boston-area eateries, but had to rise up through sexist work atmospheres. But if you have a knack for cooking, or baking, you can turn that idea into a profitable venture. Just turn your best pound cake, health food, quiche or truffle recipe — or whatever else you can whip up — into a product to sell. (You can also turn your love of food into an app, if that's more your speed.)
7. Marketing and Public Relations
Have a way with words, and people? Put it to good use! There are plenty of businesses that could use your services to get the word out to customers. Whether you're a storyteller, a video producer, or a true visionary, people need their narratives told and their products sold. Why not be the one to help them out?
Capturing a place or moment in time is a unique — and potentially profitable — skill. Photographers can build studios that document weddings, vacations and growing families for clients eager to remember those moments with beautiful imagery. Or, you can think outside the box like Maureen Erokwu. Her Google-backed business, Vosmap, takes pictures of businesses so that their prospective customers know what they look like before arriving.
9. Law Firm
When a person needs legal assistance, trust is paramount. So if you are an experienced, savvy lawyer looking to set out on your own, opportunity awaits. Whether your concentration is immigration, entertainment, maternity or conflict resolution, there are opportunities to turn your legal mind into profits. (And if you're a lawyer looking to shift gears while starting up, that can work out, too!)
10. Life Coaching
Are you the person people turn to for advice? Why not turn that clarity of thought and ability to guide others into a business? Plenty of women have. Whether you're best suited to counsel clients on their careers, health, businesses or mental well-being, there are opportunities to start and grow a venture based on your talents.
This is a booming industry, with lots of ways to break in. Whether you start an app like Melody McClosky of salon-booking app StyleSeat, craft skincare product like Daisy Jing of Banish and Funlayo Alabi of Shea Radiance, sell perfumes like Carina Chaz of DedCool, or do hair and makeup for special events like Takia Ross of Accessmatized, you can find a lovely future for yourself in this sector.
12. Human Resources/Staffing
If you have a contacts list a mile long and a knack for making connections, you should consider starting up in this space. Kristine Jones did, and now her firm, New England Flagger Services receives government contracts for the safety staff she trains. Nina Vaca, meanwhile, has made a billion-dollar business out of tech staffing firm, Pinnacle Group. And it's not just money you can make — Dr. Uma Gautam's female executive headhunting firm, HeadPro Consulting, is also making a difference for women's representation in India's c-suites.
13. Medicine and Health
What's more important than one's health? Creating a business in this space requires expertise, to be sure. But if you have it, consider following in the footsteps of women like Future Family's Claire Tomkins, Pandia Health's Dr. Sophia Yen, Neurocern's Dr. Anitha Rao, or Whole Women's Health's Amy Hagstrom Miller. Each found creative ways to assist people with complications surrounding infertility, birth control and abortion access, and dementia. Grit's Tish Scolnik also found her calling in health, putting her engineering skills to use to design "the mountain bike of wheelchairs."
If you believe laughter to be the best medicine, owning a comedy club could be for you. Amanda Austin and Caroline Hirsch have made livelihoods out of it, and their spots — the Dallas Comedy House and Carolines on Broadway, respectively — are now storied institutions in their respective cities. It can be a tough road for a female founder to travel, but these two women entrepreneurs prove it's possible to succeed all the same.
15. Educational Products
An education is a powerful thing. Stacy Ratner's social enterprise, Open Books Ltd., has turned her understanding of this fact into a firm that improves literacy rates among Chicago children. She's not the only one finding success in teaching others, either — Xiaoning Wang of ChinaSprout, Tiffany Ard of Nerdy Baby, and Supriya Hobbs and Janna Eaves of Miss Possible thrive by teaching culture, science and history through their products. And it's not just for kids. Rita Robert Otu of Beau Haven Farms is helping rural women in Nigeria by teaching them how to work the land.
16. Eco-Friendly Products and Services
There are many great ways to go green in business. We recently reflected on some of our favorite environmentally friendly women-owned ventures for Earth Day, with founders like Lynn Julian and Chance Claxton of U Konserve and Ann and Jenny Siner of My Sister's Closet making the list. There are also services you can provide in this space, like Traci Phillips of Natural Evolution, who is hard at work tackling our collective e-waste mess.
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