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5 Creative Ways to Raise Money (Without Giving up Equity)

| June 20, 2012 | 18 Comments

We started Arden Reed, a custom menswear company, with only our savings.

After a few months of operating, our cash had dwindled down to a few thousand dollars.  We had people knocking on our doors to invest and we still do, but we wanted to retain our equity for as long as possible.

The founder of Maxim Magazine, Felix Dennis, once said, “Never, never, never, never hand over a single share of anything you have acquired or created if you can help it.  Nothing. Not one share. To no one. No matter what the reason – unless you genuinely have to.”

We thought creatively.  We had to.  We brainstormed and executed.  The results speak for themselves.  We raised $60,000 over 3 months without giving up a single share.  Based on our experience, we’re sharing the best ways to fund your business without giving up equity.

1. Apply for Crowdfunding

We pitched Kickstarter in late 2011 and were rejected.  Kickstarter didn’t launch companies and they didn’t like the idea. They were more into the project space.

Failure?

Not quite.  We pitched them again, showing them prior Kickstarter projects that were similar to ours.  After a few days we were pinged that our project had been accepted!

We set our fundraising goal low.  We asked for $4,000 in our pitch giving us enough cash to survive a few more months.   We sent emails to friends and family asking them to spread the word.  We crossed our fingers that we’d at least make the $4,000.

We launched and within a few minutes we had our first contribution: $350 from Hong Kong.

It worked!

Our campaign lasted 30 days.  We had people emailing us questions constantly.  By the end of the campaign we raised over $20k, over 5 times our original goal.

2. Get a Loan from Friends & Family

My dad got the entrepreneurial bug at the same time I did.  He worked in the restaurant business for over 20 years and after being overworked for so long he quit.

He started selling restaurant equipment with only $100 in his pocket.

To finance his first purchase he pulled out a $5,000 loan from the family.  He’s leveraged it incredibly well.  On my most recent visit to my hometown, he had rented out a warehouse, had five trucks, two forklifts, and a few trailers at his disposal.

He paid back the family in full.

3. Apply to Startup Chile

Startup Chile is giving $40,000 to 1,000 startups.  Ever year they take on 3 batches of 100 startups.

My partner and I were looking at raising funding this summer.  We had our valuation set and started sending out emails.  At the same time, we applied for Startup Chile.  I had applied once before with a different startup and had been rejected.

Persistence pays.

We were accepted into the 2nd batch of 2012.  The grant gives us $40,000.  In exchange, we’ll be living in Chile for six months.  The cash has given us extra breathing room and we still don’t need to raise funding.

4. Use your Credit Cards

Tim Ferris is probably the most well known example.  He pulled $5,000 in credit card loans to finance his sports nutrition company.

That cash eventually turned into a $40,000 a month cashflow business which allowed him to start his Four Hour Work Week empire.

It’s a dangerous game to play, but one that has launched a few empires.  A few examples include Larry Page and Sergey Brin who used plastic for Google, the founders of Guitar Hero, and the founder of Bradford & Reed which reached over $30 million in revenue.

5. Start Side Projects

The founders of AirBnB were in a similar position in the early months of their startup.  They had a bit of cash coming in, but not enough to sustain themselves.  Their backs were against the wall.  They started brainstorming ideas to bring in extra income during the Democratic National Convention.

What did they come up with?

ObamaO’s and Captain McCain’s Breakfast Cereal.

They hustled.  That breakfast cereal idea brought in an extra $30,000 in needed cash and helped build a company worth over a billion dollars.

Overview

Money shouldn’t be an objection when you’re starting a company.  Be creative.  Use your resources and do things that don’t scale.

We’ve been able to raise over $60,000 in funding without giving up a single share to investors.  We and countless other entrepreneurs have proven its not impossible.  Get fundraising out of your head, think creatively and start building an incredible company.

Carlos Solorio is the founder of Arden Reed, a custom menswear company.

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Category: Funding, Startup Advice

  • http://www.facebook.com/profile.php?id=550069552 Gurpreet Sidhu

    Any reason why my comment was deleted???

  • imminence

     it should be not so good

  • Pingback: 5 Creative Ways to Raise Money (Without Giving up Equity) « Coffee with Kath

  • http://Under30CEO.com Jared O’Toole

     Hey Gurpreet. Sorry about that. Your comment was not deleted. I looked and found it in the spam filter..I approved it and it is below now. Thanks for it!

  • Steph

    What a great article! Seriously, this one was really relevant and practical. Liked the examples too. Thanks so much!

  • http://www.facebook.com/profile.php?id=550069552 Gurpreet Sidhu

    Thanks very much Jared and sorry about that – it’s just that I saw my comment there and then disappear 5 minutes later :-S

    Thanks again :)

  • http://www.facebook.com/chernannng Chern Ann Ng

    If you’re raising money for a product, rather than a project, then Kickstarter is an excellent place to do it. Viewed as a pre-ordering system, 5% is an extremely low commission on a sale, since you’ll need to pick up the tab for credit card processing anyway.  Compare this to other marketplaces like eBay and Amazon that have a large reach, the fees here are usually close to 15% excluding credit card fees.  Or, compare to affiliate programs which you can run through providers like Commision Junction or on your own sites, if you offer anything less than 10% no one is going to want promote your product.
    We’ve raised $1.1 million (and counting) over two projects this way, the best $55k we’ve ever spent.  It’s a common mistake of new business owners to underestimate the cost of marketing; it’s money you have to spend, and  Kickstarter makes it so you’re not even out of pocket.  Search for coolminiornot on Kickstarter to verify the numbers.

    Compared to Indiegogo, Kickstarter has a significant advantage in funding potential;  with huge pluses in both perceived credibility/safety and audience.  Non-US companies have realized this and are intentionally opening representative offices in the US in order to use Kickstarter (Carmageddon Reincarnation is a recent high profile example in the video games sector).

    I’m not sure how long this phenomenon will last but while the audience is enthusiastic that’s the platform we’ll be using in the short term (before the JOBS Act).  

  • http://www.facebook.com/chernannng Chern Ann Ng

    If you’re raising money for a product, rather than a project, then Kickstarter is an excellent place to do it. Viewed as a pre-ordering system, 5% is an extremely low commission on a sale, since you’ll need to pick up the tab for credit card processing anyway.  Compare this to other marketplaces like eBay and Amazon that have a large reach, the fees here are usually close to 15% excluding credit card fees.  Or, compare to affiliate programs which you can run through providers like Commision Junction or on your own sites, if you offer anything less than 10% no one is going to want promote your product.
    We’ve raised $1.1 million (and counting) over two projects this way, the best $55k we’ve ever spent.  It’s a common mistake of new business owners to underestimate the cost of marketing; it’s money you have to spend, and  Kickstarter makes it so you’re not even out of pocket.  Search for coolminiornot on Kickstarter to verify the numbers.

    Compared to Indiegogo, Kickstarter has a significant advantage in funding potential;  with huge pluses in both perceived credibility/safety and audience.  Non-US companies have realized this and are intentionally opening representative offices in the US in order to use Kickstarter (Carmageddon Reincarnation is a recent high profile example in the video games sector).

    I’m not sure how long this phenomenon will last but while the audience is enthusiastic that’s the platform we’ll be using in the short term (before the JOBS Act).  

  • @johnvasili1

    All very good points on raising money ,  working capital is the life blood , how about getting paid on time or even early, how about being paid within 3 days of delivering goods/services? 47,000 small traders get paid via http://www.invapay.com in 3 days, that works for me..

  • http://twitter.com/jon_tavarez Jonathan Tavarez

    Good stuff !

  • http://twitter.com/jon_tavarez Jonathan Tavarez

    Good stuff !

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  • http://www.facebook.com/bbsklda Andrea Moore

    Great article, however it is very difficult to apply any of your pointers in Mozambique. My husband and I own a small service & maintenance company and we have found it extremely difficult to raise capital. The only place a company can get, after massive red tape and huge time delays, are the banks.

  • http://www.facebook.com/simcha.gluck Simcha Simpy Green Gluck

    Took your advice and just launched our FreshBiz Kickstarter campaign a few days ago! We are so excited and as a brand new game that teaches entrepreneurial thinking this is very relevant for this community too. Thanks for checking us out, supporting, and sharing us as well!
    http://www.kickstarter.com/projects/1862198374/freshbiz-changing-the-way-you-play-life?play=1&ref=search.

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