How to Raise Funding at Every Stage of the Business
Crowdfunding can be used to raise funding throughout the life of a business. When the idea of a new business strikes you, and there’s nothing built yet, you should run a donations campaign–ask family and friends to donate $10K collectively. Make sure they understand that no one is getting paid back. The value of this step is that it establishes a network to support your business. The money can be used for initial costs, such as filing patents, building websites, and starting work on a prototype.
Rewards / Prepay Campaigns
The next step is to use a Rewards/Prepay campaign to pre-sell 50 units of your product. It can be anything. The key here is that you start to build your customer network. If you can’t presell 50 units, you have a product problem that needs to be solved before you go any further. The funding you raise should be enough to build the first version of your product.
Customers to Investors
With a successful rewards campaign behind you, you now move towards turning those customers into investors using the Texas Intrastate crowdfunding campaign. The Texas Intrastate law gives anyone the ability to invest in your business. Again, the funding helps, but building your network is the critical point. If all fifty of your Prepay customers invested in your business, you now have fifty brand ambassadors supporting your business–not trivial support.
With support from your customers and now investors in your business, you approach angel investors and start to raise funding to grow the business. Angels invest $250 to $2M to grow a working operation. When you arrive at the angel investors’ door, they expect you to have a product at some stage of usage and some revenue. The previous steps give you the ability to do that.
If you need more funding, then you can go back and raise revenue-based funding. The investors at this stage take a piece of the revenue as payment rather than an equity stake.
If you find yourself having trouble raising funding, you may have skipped some essential steps. Before proceeding, you should go back and fill the gaps in building your support network and customer base.
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Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: email@example.com