Joe Daniel Johnson
Ideas for Financing Your Startup
Entrepreneur. Investor. Startup Expert.
In an article about financing a startup, CEO of Startup Professionals Mark Zwilling, stated, “The most successful entrepreneurs are the ones who think creatively, not only about their offering, but also about how to acquire cash, and never say never. They have to sell themselves, more than their product, to close on every alternative source of funding.”
Truer words have rarely been said.
If you’re ready to see your dream become a reality, then it’s time to start assembling the funding to back your idea.
There are multiple sources for funding, some of which you may already have considered and others which perhaps have yet to cross your mind. In this article, we’ll cover some different ideas for funding your endeavor.
Not every funding avenue is appropriate for every business – or every entrepreneur. You may feel more comfortable with one avenue over another and that’s okay. The two most important points to bear in mind are: 1) to fully understand the risks implicit with each particular sort of funding; and 2) to appreciate all of the lender obligations incurred by each option. The more complete your understanding of the possibilities, the more able you are to take only calculated risks.
As I cover several of these different funding sources, I’ll note some of the risks associated with each so you can make a more informed decision when it’s time to start seeking financing for your new venture.
Seeking Investors
The first thing that probably comes to mind when considering funding options is investors. Shark Tank has certainly helped to popularize the idea of scoring financial investment from venture capitalists and angel investors. Combined with the stories of successful investors who picked the right companies at the right time (as well as the hard-luck tales of those who failed to get on board early), it’s no surprise that many entrepreneurs consider seeking outside investors to be a viable avenue of soliciting funding.
Is it, though?
For most companies, the answer is ‘no’. At least not on the scale of Silicon Valley investors where some startups are given millions of dollars to focus on their websites, apps, or products.
For small businesses, it’s far more common to receive investment funding from friends, partners, and families.
Considering Risk
Having investors means that you have to answer to someone. Most investors do so because they expect returns. They generally know the risks, but they’re betting on success. Seeking outside investment is best for startups that are comfortable with allowing those investors to be involved, to varying degrees, in the process of running the business. Additionally, don’t fail to consider that, if your investors are friends or family members, your personal relationship may permanently change or suffer as a consequence of their involvement.
About the Author
Joe Daniel Johnson is an entrepreneur, investor, and startup expert. He is the founder and principal of GoodField Investments and the GoodField Foundation (www.GoodField.com).
Joe has a Ph.D. in Entrepreneurial Leadership and an MBA. He is the author of the upcoming book on The Science of Why Most Entrepreneurs Fail and Some Succeed.
Most importantly, he is the incredibly blessed husband of one amazing wife and father of six wonderful children. He resides in Bradenton, Florida. For more information on Dr. Johnson and his work, go to www.JoeJohnson.com.
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