Without heavy venture capital investments, the main goal of a startup is almost always to successfully bootstrap their finances. Most people who are familiar with the term “bootstrap” have probably read (millions of times) the most standard ways to finance a company. Most resources tell you to ask friends and family, head to your local bank, seek angel investors, etc. Most of the time, none of this works unless you already are making a profit. That kinda defeats the entire purpose of needing funding, doesn’t it? Here are some of the more creative ways to bootstrap your cash inflow and get your business off the ground.
Creative ways to bootstrap your startup: Lending Tree
Lending Tree is a website that will offer loans funded by those who visit the website. It’s the most prominent peer-to-peer lending model that’s around. You go on there, submit the amount of money you are asking for, provide reasons for needing the loan along with a credit score, and then you wait. Your “peers” will contribute towards the portion of the loan. Depending on your risk, your interest rate varies.
This model is much easier than traditional banks, who require much more proof of your income. It also avoids the akwardness that comes with asking family members for sizeable investments. However, this strategy works similarly to a normal bank loan. You will be expected to make monthly payments on time. If you default, your credit score will be hurt the same as any other default would. If you are confident that you can make the monthly payments, this is a good source to consider for your bootstrap financing.
Creative ways to bootstrap your startup: Restructuring Payments
Some companies tend to overlook their own customers as a form of financing. If you are a consulting company that has zero dollars and only an idea, you can still try and sell that idea to potential clients. Instead of waiting for a completed job for a payment, you can restructure the deal to get 50% upfront and 50% at completion. This can provide you with some much needed capital to finish your client’s job. Some might say, “Who is going to want to pay you for a product when your ‘product’ doesn’t exist yet?” This is a reasonable query. But keep in mind, we are trying to bootstrap a startup. Startups will not succeed if the founder is bad at sales. You would already need to focus all of your energy on developing professional relationships and turning those relationships into sales. This method would merely allow you to leverage that trust.
Creative ways to bootstrap your startup: Sell a Different Product
If you can afford to put your main idea on the backburner for a while, it might be a good idea to create a short-term business and use your profits to bootstrap your bigger venture. This has been my strategy of choice when I needed to bootstrap a company. Even if the ideas weren’t related, I could use the money I earn to fund a larger and more long-term project. Who knows, you may enjoy this “short-term” idea enough to turn that into your main idea.
I have done a myriad of things to generate some startup capital. I worked at a music store, so I struck a deal with the owners to sell my own guitar picks there. They cost pennies to make, and I could usually sell them for a couple dollars apiece. I have also written eBooks and sold them online. These are things that require virtually zero money to start, and only generate a small amount of money, but it can be enough to get you started on your main big idea.
Creative ways to bootstrap your startup: Hire Interns
Labor is usually the biggest cost for a startup company. Without cashflows, how can you hire someone to catch the things that slip through the cracks? Being a college student, I know that there is plenty of help to be found on college campuses. I am around so many passionate talented people each day that I would look here before I ever went and looked to pay somebody. Maybe it’s just my age talking, but I feel like I would take enthusiasm and passion over experience any day.
Before hiring interns, make sure that you can communicate with the college to understand if there are responsibilities on your part. If the student is doing this for credit, you will probably need to fill out a report or two, explaining the responsibilities and how the student performed.
Creative ways to bootstrap your startup: Barter
When money is nowhere to be found, bartering can be a good solution. Maybe your client has something that they are about to get rid of that is essential to your business. Lets say one of your clients is about to upgrate their computer system. You might be able to negotiate a trade; your services for their computers. They were about to get rid of them anyways, and you would be giving them your product. This way, no money needs to be exchanged and you can upgrade your standing while still having an empty bank account.
You can also do this for advertising by trading your services for an ad in the local paper. Be creative; that’s what this article is about.
With these ideas, I hope I could get your creative juices flowing. This is merely a start to all of the creative ways to bootstrap funding for your startup.