Alternative Of VC's Funding

If you’re struggling to find success in your quest for venture capital, maybe you’re looking in the wrong place.
Here are few alternative of VCs:
There are plenty of other options available when it comes to finding capital. From angels to credit cards, here are 25 alternatives to consider when it comes to funding your business.

1. Angels

Most venture capital funds will not consider investing in anything under $1 million to $2 million. Angels, however, are wealthy individuals who will provide capital for a startup business. These investors have usually earned their money as entrepreneurs and business managers and can serve as a prime resource for advice on top of capital. On the other hand, due to typically limited resources, angels usually have a shorter investment horizon than venture capitalists and tend to have less tolerance for losses.

2. Private Placement

An investment bank or agent may be able to raise equity for your company by placing your unregistered securities with accredited investors. However, you should be aware that the fees and expenses associated with this practice are generally higher than those that come with venture and angel investors. You will likely receive little or no business counsel from private investors who also tend to have little tolerance for losses and under-performance.

3. Initial Public Offering

If you are somehow able to gain access to public equity markets than an initial public offering (IPO) can be an effective way to raise capital. Keep in mind that, while the public market’s high valuations, abundant capital and liquidity characteristics make it attractive, the transaction costs are high and there are ongoing legal expenses associated with public disclosure requirements.

4. Bootstrap Financing

This method is intended to develop a foundation for your business from scratch. Financial management is essential to make this work. With bootstrap financing you’re building a business from nothing, which means there is little to no margin for error in the finance department. Keep a rigid account of all transactions and don’t stray from your budget.

A few different methods of bootstrapping include:
Factoring, which generates cash flow through the sale of your accounts receivable to a “factor” at a discounted price for cash.
Trade Credit is an option if you are able to find a vendor or supplier that will allow you to order goods on net 30, 60 or 90 day terms. If you can sell the goods before the bill comes due then you have generated cash flow without spending any money.
Customers can pay you up front for your services.
Leasing your equipment instead of purchasing it outright.

5. Fund From Operations

Look for ways to tweak your business in order to reduce the cash flowing out and increase the cash flowing in. Funding found in business operations come free of finance charges, can reduce future financing charges and can increase the value of your business. Month-by-month operating and cash projections will show how well you have planned, how you can optimize the elements of your business that generate cash and allow you to plan for new investments and contingencies.

6. Licensing

Sell licenses to technology that is non-essential to your company or grant limited licensing to essential technology that can be shared. Through outlicensing you can generate revenue from up-front fees, access fees, royalties or milestone payments.

7. Launch Customers

Find out if you have any customers willing to fund research and development in exchange for the product produced.

8. Vendor Financing

Similar to the trade credit related to bootstrap financing, vendors can play a big role in financing your new business. Establish vendor relationships through your trade association and strike deals to offer their product and pay for it at a date in the near future. Selling the product in time is up to you. In hopes of keeping you as a customer, vendors may also be willing to work out an arrangement if you need to finance equipment or supplies. Just make sure to look for stability when you research a vendor’s credentials and reputation before you sign any kind of agreement. And keep in mind that many major suppliers (GE Small Business Solutions, IBM Global Financing) own financial companies that can help you.

9. Sweat Equity

You may be able to find people willing to work for stock options in exchange for a lower salary or a delay in compensation until a later date.

10. Self Funding

Search between the couch cushions and in old jacket pockets for whatever extra money you might have lying around and invest it into your business. Obviously loose change will not be enough for extra business funding, but take a look at your savings, investment portfolio, retirement funds and employee buyout options from your previous employer. You won’t have to deal with any creditors or interest and the return on your investment could be much higher.

However, make sure that you consider the risks involved with using your own resources. How competitive is the market that you are about to enter into? How long will it take to pay yourself back? Will you be able to pay yourself back? Can you afford to lose everything that you are investing if your business were to fail? It’s important that your projected returns are more than enough to cover the risk that you will be taking.
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