Is there anything sadder, or more frustrating, than seeing a seed of an idea you came up with for a product or service bloom into a successful and profitable reality for someone else who also came up with it? But, unlike you, they had the financial backing to grow it. And therein lies the answer — funding. The problem is money doesn’t find you. You have to go out and find it.
You could say that Paul Saunders knows a bit about funding, having traversed a successful career in finance that led to his current success as founder, chairman, and CEO of Virginia-based James River Capital, an investment advisor firm that focuses on a variety of asset classes including fixed income arbitrage, global macroeconomics strategies, managed futures trading, and asset-backed securities, corporate credit, and more. So, if you’re ready to secure the money you need to move your idea off the drawing board, or out of the lab, and out into the real world, here’s a treasure trove of options he’s seen work for other entrepreneurs.
Tried and True Sources of Funding
While not every one of the following tips may work for you, there’s sure to be one suited to your situation and goal. Mr. Saunders wouldn’t have included any had he not seen them work for some enterprising entrepreneur like you.
Like charity, bootstrapping begins at home. It involves using your own sources, be they savings accounts, credit cards, or funds borrowed from family or friends. And as a bonus, you may attract investors who, seeing that you have used your own money, take it as a sign that you will do everything you can to protect yo ur vested interest as well as theirs.
The opposite of bootstrapping, crowdfunding depends on contributions from strangers who have one thing in common — they see promise in your project. As proof of the effectiveness of crowdfunding, several online platforms, such as Kickstarter, have achieved their own financial success in bringing together entrepreneurs and small investors. But before it will work for you, you need to have a marketing plan in place so you can make believers out of those who are willing to contribute with no expectation of being paid back, other than perhaps a token of appreciation.
Angel Investors and Venture Capitalists
Both of these types of investors are on the lookout for companies with promise. The difference is whereas angel investors are interested in your ideas and may be willing to help out with direct loans or connect you with potential investors in their networks, venture capitalists have their investors interest at heart and so are looking for companies that can give them a high rate of return, as much as 3 to 10 times their investment in as little as 5 to 7 years.
If your credit is good, you can apply for a bank loan, a line of credit, or if you’re willing to pay a bit more in interest, or submit to more scrutiny, an SBA loan. And don’t overlook your chamber of commerce who may be able to advise you on how to secure a local loan.
If you’re averse to incurring debt, you can issue stock in your company in return for investor funding. The good news is that you need not pay it back. The bad news is you’re ceding some of your ownership and with it, sole control.
Look Before You Leap
The key to creating a successful and prosperous business is to first decide on what you want your business to look like before you decide on the best funding option for your situation. It’s how Paul Saunders has been able to build a flourishing empire that has prospered for more than twenty years.