How to Obtain Capital for a New Business

I’m starting a new business with a friend, and we need about $5,000 to get started. We believe that after the initial funding, we will be able to continue without any more cash infusions and that we will be able to rely on sponsors and advertising after that.

But how do we get that initial $5,000? We don’t mind putting in some money, but $2,500 each is a little more than we were hoping for. So what options do we have for getting that initial funding?

We didn’t want to go to family and as for money. We believe in our product and because of that, we should be able to convince non-partisan parties to invest with us. When you go to friends and family, you risk causing uncomfortable situations later. This should only be a last resort, and we decided against it.

One creative option for us is to use a site like Kickstarter, which is a funding platform designed to help fund creative projects. There are several of them out there, and instead of having people invest in your business, people fund projects they believe in and the project owners give out perks for certain contribution levels. So you could give away a t-shirt to each person who invests $25, but all the money is the project owner’s to keep and never has to be returned.

It’s a risk-free way to get money for a project. The only downside is that you are releasing your idea to the general public and there’s no way to ensure that nobody will steal it. I think it’s a fairly small risk (especially since we are nearly done with building the site) and the benefits outweigh that risk.

As I wrote this article, I got a phone call from my investment partner friend who I floated the idea to a few weeks ago who would help us with some aspects of the business and also be an investor. We’ve been over the idea, showed him our site mockups, and explained in detail how the business would work, what role he would have, and the terms of the investment.

Looks like we are $3,000 closer to our goal, just $2,000 to go!

Readers, do you think we should fund it ourselves and assume the risk or go with Kickstarter to get the rest funded?

11 Responses to How to Obtain Capital for a New Business

  1. I think it depends on how easy it would be to replicate. If you release too many details someone else might come along in an attempt to take some of the market. Secrecy is always the safe route.

  2. Nick says:

    I agree w/ 20’s, but think if you can get enough information to entice people to invest without giving away too much you could get some good “free” marketing for your new project.

    At the end of the day, great ideas that are put into motion by great people may be easy to “copy” but the copycats will probably not last very long. You’re the one w/ the passion.

    Two cents.

  3. krantcents says:

    Using other people’s money is good, if yo do not have to give away too much.

  4. Sounds like a great site. I’ll have to go check Kickstarter out. Good luck on the last 2k. $1,000 from each of you is a lot more acceptable right?

  5. Kickstart is such a great website.

    I think there are a lot more factors involved in this decision. Kickstart could be a good option but I would way things out mathematically a bit more first.

    An0ther thing to keep in mind with secrecy from what I have seen as an angel investor. The people who are so concerned about protecting there idea that they do not share it will never make it happen. NDA’s and all that stuff are good but you have to be willing to get it out there if you want to make it happen. In the end it is about execution, if you execute your plan and have everything set up to make it happen, that is what matters most. There really are not as many people out there stealing ideas as you might think, and if your idea was that easily stolen then it was not that good of an idea to really make a business out of.

  6. With just 2k to go I would just fork out the 1k each! On the other hand Kickstarter could be a good way to market the business.

  7. Don says:

    KickStart: The only downside is that you are releasing your idea to the general public and there’s no way to ensure that nobody will steal it.

    Yeah, I’m a bit intimidated by putting my ideas out there for others to steal too. But if you have a strong idea and have most of it implemented, they perhaps KickStart might be worth the risks…

    Tough call.

  8. Matt says:

    You may not be interested in taking on debt, but you could try a peer to peer lending site as well. I don’t believe they ask you to put out your business idea just to commit to repaying the loan.

  9. Emily says:

    Two people working together, using a bit of patience, should be able to save up that amount in a few months…

  10. I like the idea of a business that has limited liability. That requires little money to start. A business that is not subject to many government regulations. Does not require many special permits or licenses to operate. A business that can be quickly and easily shut down if needed. And a business that has limted contractual liability after its shut down. Requires not a very great deal of knowledge or experience to start or operate.

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