Have you ever had a spark of inspiration? A new idea for a cool product or tool, that you eventually sent to the land of forgotten dreams? Getting a new concept off the ground can be intimidating for new inventors. Money, or the lack thereof, usually stifles more dreams than those that make it to see the light of day, but it doesn’t have to be this way. There are at least seven ways to fund your new invention and grow your business. Here are some tips for funding your new invention.
The quickest way to fund the initial development of your idea is to dig into your stash. If you’ve been saving up to reinvest into your vision, bravo! However, it is important to set a realistic budget that does not interfere with your living expenses and other priorities. Determine the most important next steps for your business and allocate the funds accordingly. Every dollar counts, so make sure that you are spending the money on things that matter most.
Friends and Family
So, you don’t exactly have $10,000 lying around, you can seek the help of family and friends. Maybe you can pitch your idea to those closest to you first and gain generous donations or even loans. If others around you believe in your idea, they are usually willing to help and contribute to the development of the idea. The amount that some are able to give may not be much but remember every little bit counts.
SBA Loans/Government Grants
The Small Business Administration is a great resource for individuals looking to start a business. For years, the administration has helped small businesses start, grow, and succeed through counseling and loan opportunities. Last year, more than $50 million in SBA loans were provided per day to U.S. small businesses.
Crowdfunding is also a great way to gain support and raise money for your new invention. Equity crowdfunding allows companies to fund a business through the offering of shares to the general public, but there are certain restrictions and limits on eligibility and how much capital can be raised. Another potential drawback from equity crowdfunding is giving up ownership interest in your company.
If you would rather not dilute your equity, there are other options available that allow you to fundraise without losing any ownership in your company. With non-equity crowdfunding, individuals donate based on receiving incentives such as your product at a discounted price (if you have a Business to Consumer product) or other offerings in exchange for their investment.
Some popular sites that companies have successfully raised funding for non-equity crowdfunding include Kickstarter and GoFundMe.
If you have already developed your idea or invention, and are ready to scale, you may want to seek the help of an angel investor. Angel investors are typically wealthy individuals or investment groups who invest in a new or small business venture for start-up or expansion from their own pockets. An angel investor is a great solution for startups that do not yet have enough collateral to put against a secure bank loan. It is important to note, however, that an angel investor typically seeks anywhere from 10% to 50% of your business, and often looks to be involved in all decision making for the business moving forward.
Venture Capitalists, on the other hand, are private equity investors that provide capital to early-stage startups and emerging companies in exchange for an equity stake. Typically, those businesses will need to exhibit or have the potential for high growth prior to obtaining funding. Therefore, you have to understand your market size, how to capitalize on it and be able to convey how your product is a perfect market fit. Venture Capitalists also want to see company projections over a period of time to evaluate the level of risk versus return associated with this investment. Basically, it’s what you see on Shark Tank.
This article was written by Lavii, a solutions-oriented tech company founded in 2019 in the Washington, D.C. area.