Home Opinion How to fund your start-up without spending a penny.

How to fund your start-up without spending a penny.

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Whether it’s to launch an e-commerce or to build the new electric car, a source of money is key to starting up your project and this is often impossible to find when you’re broke! However there are many avenues which you can follow to gain the funding to get your project started. Within this article I will describe a couple of ways to get your start-up going without investing a penny of your own money.

Love Money (from $10 to $5000)

Love Money is the first port of call if you are looking to raise a small amount of money to fund your start-up. Love money is based upon a similar concept to that of raising money for charity, donations can be received from your family, friends, ex workmates etc. It is silly to underestimate this step as it can often prove to be not as easy as it looks! As investors, your entourage will want to know what they are donating to and how their money is going to be used, obviously your mum can be excused as she will always do anything for her child! It is therefore your job to prepare a good presentation and maintain good communication by email to convince them to help you.

Crowdfunding (from $10 to $50000)

Crowd funding is a way of raising funding by asking a large number of people each for a small amount of money. There are four different models of Crowd funding:

  • Reward-based model: In return for a donation, you will provide some type of incentive (T-shirt, prototype of products etc). The most popular reward-based crowdfunding platforms are: kickstarter.com, Indiegogo.com.
  • Peer-to-peer model: You can lend money to a large number of people. The most famous platforms which provide this service are: Lendinclub.com, zopa.com.
  • Equity-based model: This model works in a way that you can propose stakes of your start-up to people helping you to fund your venture. The most popular platforms offering this service are: crowdcube.com, crowdfunder.com.
  • Donation-based model: This is the simplest model and is based upon receiving funds from individuals that don’t expect to receive anything in return. The most popular platforms offering this service are: rockethub.com, crowdrise.com

Business Angel (from $50000 to $500000)

A business angel is a wealthy individual ready to invest personal capital into early-stage start-ups, in return for an equity stake. For those of you from the UK this is very similar to the TV show ‘Dragons Den’ which sees wealthy ‘business angels’ invest in companies proposed by entrepreneurs brave enough to pitch on the program. Early-stage meaning you have already launched your product or service, and have some promising figures which may appeal to investors. A business angel is very useful in that he is an affluent person, they also often have lots of contacts and can help a business progress acting like a sort of mentor to the young entrepreneur.

Venture Capital (from $1billion to $5billion)

The “VCs” are group of wealthy investors, banks or other financial institutions ready to invest together in your start-up. If you are already at this stage then I can only say a massive congratulations! In general their goal is not to rule the start-up (they won’t take more than a 33.33% stake), but simply to get a say in company decisions.

There are a lot of other ways to get funding such as grants or loans but the conditions of which often depend on the country your start-up is established in. So my advice would be to conduct some research to see what are the best options for your own start-up, don’t simply follow the crowd.

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Hilaire Besse

Hilaire Besse

Co-founder chez Pick & Pow
Co-founder at Pick & Pow - French entrepreneur, crazy about innovation, entrepreneurship, and patatas bravas. Want to talk about your startup? Reach us on: mag@pickandpow.com