Funding Your Small Business Without VC
As a startup business, the odds of survival are stacked against you. According to Forbes, 9 out of 10 startups fail. In the first few years, so much depends on finding funding sources that will keep your idea afloat until you generate enough sales revenue to be viable.
When it comes to funding, venture capital is the most talked about approach. However, the reality is that seeking out VC funds is highly competitive, expensive, and often ends in failure. In fact, VC funds invest in fewer than 1 in 400 companies who pitch them. Even among those companies that do actually get VC investments, there’s no guarantee that they’ll make it.
One big reason that startups die off is that the founders neglect small, pressing costs — website fees, consultation expenses, etc. — as they wait for a bigger VC funding. To keep your startup safe from that pitfall, consider bootstrapping in the early stages of the business cycle.
What Is Bootstrapping?
If you’ve ever heard the phrase “pull yourself up by your bootstraps,” then you’re already familiar with the concept behind bootstrapping. Investopedia defines the term as “a situation in which an entrepreneur starts a company with little capital,” but the practice is more nuanced than that. Bootstrappers go to the effort of securing smaller sums from unconventional sources to fund basic business endeavors.
How Can I Start Bootstrapping?
There are a variety of internal funding sources an entrepreneur can turn to for bootstrapping. Some may prefer to start small, reaching out for low- or no-interest loans from family or dipping into personal savings. If you’ve got a house, you may be able to take out a mortgage equity loan. If none of those options work, it’s also worth signing up for crowdfunding sites like GoFundMe or Kickstarter.
Another method of financing — one that is too often overlooked — is grant funding. Grants can come from a variety of public and private sources. The U.S. Small Business Administration offers information on available federal grants on their website, and the federal government keeps an updated list of grant offerings as well. Websites like GrantWatch and the Amber Grant Foundation are also helpful resources for finding funding, as are private companies. ATTExperts.com, for example, is currently offering a $1,000 grant for small businesses or startups with great ideas.
What Can I Gain From Bootstrapping?
Going the bootstrap route isn’t for the faint of heart. You’ll have to make sacrifices and be very involved, performing daily duties like buying office supplies and creating a budget on your own. It’s worth it in the long run, however, as bootstrapping will result in myriad benefits for your small business.
- You’ll be in control of company culture. You can create the environment for your employees — not a board of directors.
- You won’t have to worry about an exit strategy. Investors care a lot about having a viable exit strategy that will give them a big return. With bootstrapping, you’ll be free to take greater risks.
- You’ll enjoy greater flexibility. Any internal changes can be dealt with quickly; you won’t have to sit through endless meetings for investor approval.
Though bootstrapping can be tough, it’s a great alternative to the daunting task of chasing VC investment. To boost your chances of success, prioritize your costs carefully and take advantage of as many different fund resources as possible.
Alice Williams is a communications professional and freelance writer, covering topics related to business, tech and social media. She has an MA in Communication Studies with an emphasis in corporate and organizational communication.