How to Start Financing your Castle

As I have mentioned, I developed a prototype and have machinations of turning it into a business. I am also constantly analyzing the landscape and identifying potential startup ideas. Now sure, I may have built some beautiful castles in the sky, but how do I actually start building those castles? How do you transition from a dreamer to a doer, when it comes to starting a business?

So what I’m talking about today is the concept stage. This is the obligatory first stage: a seed of an idea, a glimmer of a revolution, a machination to disrupt (which by the way, is a word to start throwing around if you want some immediate credit as an innovator ;-) . At this stage, there really isn’t a protocol for success.  (Well actually, there is Starting a Business for Dummies, but I obstinately refuse to add any of the “Dummies” line to my library). In order to advance a business from the concept stage, one needs to really bootstrap: define goals and schedules in an unstructured, ambiguous environment, work against incredible odds (most startups fail here), and harness a little bit of delusional hope and a lotta bit of perseverance. During this stage, the main goals are:

• assemble a team that:
  - encompasses core competencies
  - works well together
  - has some informal mentorship or advisory board
• develop proof-of-concept for your business
  - product: develop a prototype and demonstrate use to customers 
  - website/app: set up website/app and collect stats and feedback
• ultimately:
  - get customers on board
  - establish viability and need for your business in the marketplace

With these bases covered, the company needs some capital to get operations going. (And note, based on the venture, significant money may have been needed to develop the prototype or website.)

There are several options to get off the ground. Basically, these methods involve personal investments and endeavors (taking on credit card debt, cutting expenses, renting out your apartment, selling assets), or… which is something I will need to start becoming comfortable with: friends and family. This means approaching people that have some expendable funds. I think it is best to establish right away what that money means.

• Is that money a loan or a gift?
• If it is a loan (and not a gift), do they expect interest? How much?
• When are you expected to return this money? 
• Does this person understand this is a very risky stage?
• Can this person absorb the financial loss if your idea doesn’t pan out?

Once this groundwork is established, I think it is very important to keep the lines of communication open. This early “investor” might not have any actual claim to your business, but it would still be advisable to keep him or her apprised of the business developments. 

Now another viable option is competitions. As a matriculated student, there are multiple business idea, pitch, and prototype competitions . I would definitely advise you to explore the websites and departments at your school. It is amazing how many competitions and grant opportunities there are. And even if you feel like you don’t have the right background (business, economics, etc)– do NOT let that stop you. Often times possessing a different background gives you a valuable, alternate perspective and first-hand access to problems no one else will have. Now, that I am not a student, I am finding it a little more difficult to find competitions and resources to start a business. But that said, I have found competitions for small business owners (or conceivers) that only require you to attend a few orientation sessions through the organizing body.  Here are the competitions I found for very early startup ideas:

•  New York StartUP! 2015 Business Plan Competition: Must live in the greater NYC area. Business must have earned less than $10,000. Must attend orientation sessions. Next cycle: Feb 2016 
• S.E.E.D. Grant Program: For women in the business planning stage, or women operating a business for less than 6 months. Business must be located in New Jersey. Must attend orientation and classes to apply. Next cycle: spring 2016. 
• The Pitch: 90 second business pitch for your idea - this cycle apps due July 31, 2015!

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I also recently started volunteering with an app-based startup, and I thought they had a very interesting way to earn some money. Their website outlined a campaign to raise a relatively small amount of money ($2500). For pre-outlined increments of donated money, the donator would receive expanding incentives with increased donation amount. (Example rewards: giving the donor a shoutout in the company newsletter or awarding the donor with a chance to cameo in an upcoming promotion video.) And then – you probably got here before me – I realized that this is a form of crowdfunding. (Hey, I’m learning!) Now this campaign looks like it was just one form of crowdfunding: reward based. I know that crowdfunding can also be equity based – the donors get ownership stake in the company. In addition, I know that some crowdfunding platforms may require the company to reach a campaign goal in order to actually keep the funds raised during crowdfunding. The platform may even take a percentage of the funds earned. I think crowdfunding sounds like a great idea, and may warrant a separate post...

So to summarize, here are just a few of the earliest ways to start raising capital for your castle:

• Credit cards
  
• Airbnb (rent out your home)
• Use funds from another business
• Sell assets
  
• Home equity loan
• Win a contest
• Friends and family
• Crowdfunding

Sources:
1. Business News Daily
2. Go4Funding