The high rate of failure for new products entering the retail arena frequently has its roots in a lack of capital or funding. All product startups cost money for everything from product development to late-stage marketing. Unprepared entrepreneurs stare at dwindling personal bank accounts or overloaded credit cards with horror. Product entrepreneurs struggled to find investors as time takes away toward their planned launch date.
Understanding the best ways to finance your product startup can alleviate a lot of stress and delay that contributes to company closure. These seven ways to raise capital represent valid options to consider.
1 – Self Funding or Bootstrapping
Save up your own money from your regular job or side hustles with the intent to use it to start your own venture. This is the simplest but not necessarily the easiest way to raise capital. You do not have any investors to impress. You have no loans or credit to pay back. All you need to do is use your money wisely pre-and post-launch.
2 – Crowdfunding
A common and very modern way to finance new products is through public funding platforms like Kickstarter and Indiegogo. Build a profile, impress the public with your product design plan and story, and receive money you never have to pay back. This digital, viral financing option works best for niche products that will excite a specific audience.
3 – Pre-sales and Minimally Viable Products
Pre-launch sales are commonplace in software and media industries but can also work for other things. Create a minimally viable product, describe and market it and the end product effectively, and offer valuable benefits to convince people to purchase it before development completes. The only risk with this option for startup financing is if you fail to deliver on your promises.
4 – Product Startup Partnerships
Three main types of business partnerships can help you get financing for your product release. Of course, you can open the company with one or more individuals that you know on a personal and professional level. Everyone puts in their own funds. Also consider partnering with another established company or a nonprofit organization who has an interest in product similar to yours. Collaborations come in a variety of formats, so take the time to research possibilities and negotiate carefully.
5 – Small Business Loans
A local bank or credit union or the Small Business Administration and offer a business loan if you have a strong credit history and an impressive business plan. While this is one of the first options many entrepreneurs think of, it is not necessarily the best. Taking on expensive debt before you have proof that your product will create profits is a risk. It is your job through market research and smart development to minimize it as much as possible.
6 – Angel Investors
Although these types of investors often, from your own family or networking group, there are individuals who market themselves as angels. Although you can receive sufficient financing, you have to give away part of the ownership equity as compensation. Be sure to define their roles and how much input they have in operations before considering this option.
7 – Venture Capital Firms
In order to receive money from venture capitalists, you need an incredibly impressive business plan and product prototype. If you can prove that your startup will succeed and become profitable quickly, VC firms are more likely to invest their money in your dreams.
Looking to get into retail once your company is fully capitalized? Contact us at [email protected] or by phone at 630-246-4068 to get more information on how Retailbound can help scale your brand in the retail space.
