One of the biggest challenges any entrepreneur faces is raising capital. It’s a lucrative industry, which is why there are so many reality shows based on the concept. Shark Tank, The Pitch, and even companies dedicated to venture capital. Lots of billionaires double up as angel investors, funding start-ups so they can cash in later.
As an online business entrepreneur, all these avenues are open to you. Your main advantage is you can succeed with far less start-up cash. Chris Guillebeau wrote a book called The $100 start-up and hosts a podcast called Side Hustle School. In both, he gives numerous examples of low-income start-ups and gives stats on their progress.
The ventures showcased include things as zany as chicken saddles, worm farms, and importing crickets … to more ‘serious’ gigs like developing online training programmes for accountants and special needs teachers. The entrepreneurs on the show range from tweens and teenagers to retirees, and a lot of them started with $100 or less.
How much do you need?
Your best starting point is to trim your budget as far as it will go. Work out of your home, or use a friend’s space to cut down rent and utilities. Don’t make or buy excess stock until you’re sure you can move it. This also saves the expense of storage space. Where possible, request pre-orders and deposits so you don’t have to produce out of pocket. Get someone you trust to draft your starting costs. They’re more likely to be objective.Once you have a figure, look into your savings. Ideally, we’re focusing on $100, maybe $500 on the upper side. If you start inching towards $1,000, consider a smaller project, at least to start with. If you have a weekly or hourly job, decide to focus on raising that $100 to $500. Forego some treats and be ruthless in your savings tactics for a few weeks or months, until you can raise that amount.
Another option is to ask friends and family to invest in your business. You could sell them shares, or take a soft loan, depending on the relationship you have with them. If you’re offering shares, make sure you always retain majority stake, just so they don’t turn on you when your venture succeeds. For example, you could sell 30% of your shares.
Say you divide your company in 1,000 shares. Keep 700 and sell the rest at $1 each. This way, you only need 5 investors of $20, or 10 investors of $50 each. This same approach can be used on crowd-funding sites. If your business is arts-related e.g. a writer, film-maker, podcaster, v-logger, or robot-designer, you could open a Patreon and request fans of your work to support you. Many will be willing to sponsor you with $1 to $5 a month.
In exchange, offer exclusive access to your stuff. Or you could use sites like Kickstarter, Indiegogo, Appbackr, or Sellaband. Whether they’re intimates or strangers, the best way to raise funds is to just ask … so pick your prospective sponsors wisely.