Almost all startups need funding. Almost all startups can’t get it. New options to exit the conundrum.

A recent New York Times article (see link below) discusses some new creative ways to raise capital — asset-based lending, lease back, cash advances, and peer-to-peer loans. Most of these options require that you have some kind of asset which is often the very reason startups can’t get loans from banks to begin with.  However, the different options are worth reading about. I think the peer-to-peer loans might interest many of you…it reads almost like a loan version of crowdsourcing. The author describes the type of funding, how it works, what it will cost you and resources who do it.

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There’s also the option of finding a venture capitalist (VC) or angel through your existing connections.  Before contacting them, remember this contact is being given to you as a personal favor and the contact themselves will be seeing / talking to you as a personal favor.  Act appropriately appreciative. The “ask” should include two key points.  First key point:  Let them know that you understand you are not fundable by them and that you are not approaching them for money.  Second key point:  Ask them to review your executive summary or whole business plan and offer advice.  What you are looking for from them are two things:  First, they will immediately hone in on any weaknesses in the plan or business model. Listen carefully.  You might be able to fix the weakness. You might not. But if you can’t fix it, at least you will know it exists and can either address it in advance in future presentations or be prepared with an answer when it’s brought up.  My last company did this with a very well respected VC who gave us enormous feedback.  In the first 30 seconds of the discussion (after the introductions and polite conversation) he zeroed in on a single (big) problem our company had and couldn’t identify (hey we drank our own Kool Aid, and had no perspective – a common situation in startups).  It was an extraordinarily valuable 10 minute phone call.  Second, they might be able to refer you to a source that can fund you.

http://www.nytimes.com/2012/08/02/business/smallbusiness/for-small-businesses-bank-loan-alternatives.html?_r=1&ref=smallbusinessemail&nl=business&emc=edit_sb_20120801

 

Sandra Holtzman teaches CEO 035: Licensing.
She is the author of Lies Startups Tell Themselves to Avoid Marketing.