The most common question among young entrepreneurs with great business ideas is, “How do I fund my first startup?”
Those who find the right answers end up in the 6% of success stories.
Yes, only 6%. But don’t fret, we have put together the best startup funding options to help you fund your first startup.
Dive in to know what startup funding option will best suit your business!
How does startup funding work?
As a startup founder, you will find multiple options available to fund your first startup. It is critical for you to understand and evaluate these funding options to find the ideal one for your startup.
Money is not the main risk of investing in the startup. Venture capitalists evaluate the company in question at each stage and proceed to invest only if the growth of the company seems to gratify.
“Risky” is the term capitalists use to describe startups, and that is why getting the money to flow is difficult.
Unlike traditional businesses, startups are expected to be disruptive and show growth in a short period. The process of investing money in startups is also done in a slightly distinct way.
Once a startup idea is formed, or, if the business is already running, the startup founders approach the venture capitalist with a proposal. The proposal will describe how unique the business idea is and how money is generated.
If the venture capitalists are pleased with the idea, then the funding process will be taken to the next stage. After rounds of valuation, the seeding fund, and series A, B, C funds are cleared to the startups.
There are, however, two types of help you can receive, accelerators or incubators.
- Accelerator
Startups will be given seed funding, and immense resources can be accessed. These programs are created for startups to grow in the short term.
- Incubator
They are programs that concentrate more on the long term rather than short term growth. Mentoring by the capitalists will be done sparsely.
You can read more about incubators & accelerators in our article, exclusively about the two startup funding options.
What are the sources available for funding your first startup?
Sure, it can be intimidating to find the right funding option for your new startup. But before we dive deep into the intricacies of funding, let’s get acquainted with the basics of startup funding and at what stage do these options become available to you.
- Angel financing
This is an early-stage investment for an equity ownership interest, and the typical range of funds received is between USD 25000 and USD 100000
- Crowdfunding
If you can raise funds from multiple investors with your compelling business ideas, then you have crowdfunded your business.
You can read our article on how crowdfunding works for tech startups to learn more about this startup funding option.
- Small Business Credits
Numerous banks offer small business credit cards that have interest rates of 5% to 20%. The credit limits are substantially high with the addition of rewards.
- Venture Capital
To avail of this funding, a proposal is presented to the venture capitalist, and the company is evaluated for funding.
- Small Business Loans
With a good credit score, a small business loan can be availed from banks as a startup funding option.
What questions should you answer before kickstarting your startup fundraising journey?
Answer these questions before you go about kickstarting your startup fundraising process:
1. What are your funding goals and objectives?
The first question to answer in the startup fundraising process is to chalk out (broadly and definitively) your funding goals and objectives.
Typically, your tech startup’s funding goals and objectives should be documented as part of your overall business plan and then imbibed into your investor pitch deck.
Where will you use your investors’ funds? How will this allocation help your startup grow? Why should funds be used for the particular function that you have in mind?
These are questions that most successful tech startups have answers to because they work on these details beforehand.
Defining what you want to do with the funding you aim to raise will help you scale faster whilst keeping focus on achieving your startup’s funding goals and objectives.
Moreover, without a definite plan, your investors will find it hard to understand where exactly their funds are required or how they will be allocated.
2. What is your forecasted budget?
For early-stage tech startups, creating a budget is particularly challenging since there’s not much data or past experience to make an estimated prediction.
Having a clear budget in place will better answer your investors’ queries on how you plan to distribute the funds.
Consider the following startup expenses before creating your forecasted budget:
- Equipment
As a tech startup, you’ll need to forecast your budget to include the cost of computers, servers, paid licenses for software, and all other necessary hardware required to develop and test your product.
- Human Resources
Your budget should include the total estimated expenses on human resources. This includes employee recruitment costs, payroll, training costs, benefits, and more.
- Marketing
Keep a dedicated budget for your marketing activities. Ascertain your social media expenses, costs for website development, advertising campaigns, and more.
3. How to search for the perfect investor?
Once your funding goals and budget are in place, it’s time to hunt for an investor. However, you need to search for investors who are qualified to understand your tech business and add value to the business.
One of the most effective ways to find a competent investor is to come recommended to them.
Networking with industry leaders, influencers, enthusiasts, mentors, peers, and connecting with people who have already negotiated their way through the startup fundraising landscape is a great way to look for investors.
Another way to search for investors is to take advantage of popular online research tools like Crunchbase, Gust, and SeedInvest. These online tools make for a great source for accessing investor information.
How startups, that have raised over $500M in funding, chose to brand themselves differently – .TECH
Innovation is attractive, especially to VCs looking to invest in tech startups. If your novel idea promises to build the future on tech, investors are likely to have you on the radar. In other words, the greater the disruption you can create, the more capital you can raise.
4. How to perfect your pitch?
The next phase involves perfecting your pitch. This includes creating your pitch deck that spans your business plan and forecasted budget.
However, the primary aim of preparing a pitch is to address the question of why your tech startup is worth the investment?
Include your core competency and how you are solving a major problem.
Couple your USP with some hard-hitting numbers and facts about how fast your industry is growing and how profitable it has been.
This will help you perfect your pitch and drive investor attention.
You can learn more about creating the perfect pitch in our article exclusively on how to create a startup’s investor pitch deck.
What are the 5 things investors want to see before they make an investment?
Here’s what investors like to see before they invest in funding a tech startup:
1. Overall financial performance
The business of startup fundraising is risky for investors.
Which is why the first thing an investor or bank or any other fund provider will look at is the overall financial performance of your tech startup.
The volume of sales, cost of creation, monetary traction, and net profits achieved thus far are of primary importance.
The best way to go about presenting this is to create a comprehensive financial report which should categorically shed light on the following:
- Sales Forecast
- Expense Budget
- Cash-Flow Statement
- Income Projections
- Assets and Liabilities Statement
Overall, this report should highlight and emphasize considerable growth metrics.
This report will help you answer hard-hitting questions about the financial stability of your tech startup.
Investors want to know if your tech business is showing consistent signs of growth and if you plan to issue shares or borrow money or partner with new people to accelerate growth.
Also, include a solid debt repayment plan to justify that your business is proficient enough of handling all its financial obligations.
2. Competitive advantage
Startup fundraising is all about showing your investors that you are offering something unique and building something sustainable.
This means showcasing your startup’s unique core competency and its competitive advantage, with concrete evidence, that your product’s potential is worthy enough for a sizeable investment.
Investors, especially angel investors and venture capitalists, are strongly influenced by unique or innovative product characteristics that they think will serve well as a competitive advantage.
Investors constantly look for nifty nuances that distinguish a business from its competition.
From a distinctive product feature to intellectual property protection to exclusive licenses or exclusive marketing and distribution relationships, anything that can prove to be advantageous to your business will help investors to favor your startup.
3. Effective business model
When it comes to startup fundraising, having an effective business model in place is supremely important.
Typically, investors would like to delve deep into understanding the business plan and address the ‘how’s, what’s, and why’s’ your tech startup’s business model.
The business model outline should explain exactly how the startup makes its money.
For a tech startup such as yours there are three notable business models to follow:
- Subscription Model
This model includes selling a product or service on a weekly, monthly, or annual basis.
- On-Demand Model
This model involves offering a product or a service instantly. The business is crafted to offer immediate and effective solutions to customers. For instance, Uber offers an easy and convenient platform for users to book a cab.
- Freemium Model
This model means offering a great product or service for free and then charging for additional features. Just like LinkedIn offers a free platform for professionals but up-sells users to use opt for the premium model which has advanced features.
4. Large target market
Angel investors prefer investing invest in businesses that solutions that take on the challenge of addressing major problems for significantly large target markets.
A large and stable target customer base means your tech business will enjoy having the upper hand when pitching to investors.
A sizeable customer base also serves as evidence that your tech solutions have created a significant impact on the overall target market.
While this is a parameter that only established tech businesses will be able to full-fill, if you’re an early stage startup you should consider creating a working prototype and test it with a sample audience to gauge the effectiveness of your competency.
Alternatively, you should plan the perfect go to market strategy along with a prototype.
5. Clear investment structure
Your startup fundraising journey is incomplete without giving your investors a clear picture of the investment structure you have in mind.
This means giving them a clear plan that precisely defines how much money is required, where it will be used, when can investors expect their money back, and how much equity are you going to offer your investors.
Also, your investment structure should clearly highlight at what stage the investors can expect to exit the investment after they’ve recovered their investment.
Should you be taking a personal loan to fund your first startup?
The procedure for availing a bank loan for funding your new startup is similar to the procedure for availing a personal loan.
In the initial stages of startups availing a bank loan is fairly difficult. Yet the process of drawing a bank loan will be shortened if the business has a good credit score or if profits are made early.
The founders will be asked to submit the proof of address, startup registrations, and the audited accounts. After a routine procedure of bank verification of all the submitted documents, the process of releasing the loan amount will be initiated.
There are small business investment options and government-approved startup funding options for small businesses. You can also avail a personal loan in case you cannot generate the required small business loan amount.
If you have a good credit score, even an existing personal loan can be extended to generate the required amount for your startup.
Will you get funding for your new startup if you have a bad credit history?
The problem of not having good credit as an individual should not affect your chances of availing a bank loan as a startup funding option, simply because a good investor will understand that knowledge is gained with experience.
Also, the loan you take for your startup is legally not connected to your credit score.
In case your credit score is bad because of recent failure, any investor will take that as a lesson learned and will be ready to help you. A wise investor will analyze the reason for the failure and may suggest ideas to avoid such failures in the future.
If you have a co-founder with bad credit, the same rules apply. It will not disturb your startup funding.
It is however advised that you check the reason for bad credit and avoid partnering if the bad credit is due to criminal records.
Capitalists will analyze the individual before funding for their startup and background check might reveal the records.
What are the different stages of startup funding?
Now that you are aware of the options available to fund your new startup, let’s see the various stages at which the funding will be released to you, as the founder of your new startup.
- Self-funding
The initial investment you make to get an office space, recruit required personnel, and get the business running is self-funding. This is a small amount that the founders invest in the early stages of their business.
- Pre Seeding
This amount is similar to self-funding, however, it is provided by the investors. This happens in the ideation stage of the startup. Very few businesses are lucky to receive the pre-seeding amount from investors.
- Seeding
This is the funding made at the beginning, and most of the funds are used for activities like consumer research, product design, and marketing.
- Venture
This is the funding that happens at the stage when the product reaches the market. It is the stage that is considered vital in startup funding, as multiple rounds of funding will follow this.
- Series A, B, C
These are the stages of funding that follow the venture funding, and it will be discussed in detail in the next section.
- Initial Public Offering
When a startup generates public funding by selling its shares, it is called an IPO. An IPO helps startups grow in diversified areas.
Series A, B, C funding: How does it work?
As a startup founder, you must understand Series funding very carefully as this is crucial while funding your new startup.
Before the venture capitalist enters any stage of funding, the valuation of the company in question will be done. Based on the performance or growth of the company, the series funding is released.
Here, performance is more important than the idea.
- Series A
The Series A fund is typically between USD 2 million to USD 15 million. The average seed funding is a bit high, around USD 12.5 million because of the unicorns.
- Series B
This is about taking the business to the next level by creating some real demand. The range of funding lies between USD 30 million and USD 60 million, with an average of USD 58 million.
It is similar to the Series A funding process with the addition of yet another large venture capital firm.
- Series C
If your business has reached the level of Series C funding, it means you are already successful. More often, the funding will be USD 115 million, and this is a final stage before the company goes public.
Building a startup? Build it on a .TECH Domain!
Now, do you know what’s better than reading about startup funding? Hearing about it from the horse’s mouth!
The following are the stories of over 40 startup founders who candidly tell us about their journey, what startup funding options they explored, and how they finally funded their new startup. Take a look!
1. Kelly Bryant, Founder, Kelly Bryant Wellness
My success began when I started my business in an industry I was comfortable with. I had many years of experience working as an employee for another company.
I began by cutting back my hours slowly and spending the time I wasn’t working for someone else, working for myself. I kept increasing the time I worked for myself until I got to the point where I could give up all other work.
While getting my business off the ground, it also helped that marketing and writing were skills I excelled in through school and carried to some of my first jobs. Also, my husband is a website designer so I was able to utilize his skills.
Finally, I prioritized self-learning so that I could perform tasks without having to hire someone else. For example, branding, social media, and google ads were all tasks I did myself.
To summarize, I was able to utilize my previous learning, the people around me, and my drive to learn and do it myself in order to cut costs and find financial footing early on.
2. Amal Radhakrishnan, Co-Founder & CEO, Parkaze
Parkaze is a Boston-based tech startup tackling the economic and environmental problems linked to parking. Here at Parkaze, we received most of our funding through various programs designed to help support entrepreneurs and their startups.
We got a decent amount of funding through the Tech WildCatters’ Fall 2019 Program, but since then we have gained additional financial capital through other programs.
We won some competitions which generated some stipends, for example, the Boston University New Venture Competition.
Eventually, we went through the Innovate BU Program last year and are currently going through the BU Summer Acceleration program.
3. Praveen Malik, Founder & Owner, Project Management Training Business
We are in the business of providing project management education to corporate clients and individuals. I started the business on my own and bootstrapped it.
I got my Project Management Professional (PMP) certificate in the year 2005 which is a well-respected and globally renowned certification and is awarded by Project Management Institute (PMI).
I quit my job in the year 2008 and started taking project management training classes as a freelancer. Revenue was less as I started taking several pieces of training on behalf of others.
In the year 2010, I started writing my blog which is now a globally popular blog and has been generating healthy revenue. I used part of my initial training revenue and blog revenue to build the business further.
Today, we have our own office with a sales and operations team.
We hold training classes throughout India but most of our business has not moved online.
4. Manish Dudharejia, Founder & President, E2M Solutions Inc.
E2M Solutions Inc. is a San Diego-based digital agency that specializes in White Label Services for Website Design & Development and e-commerce SEO.
To fund our agency in the beginning stages, we turned to crowdfund – since it is free and effective.
The best way to get started with crowdfunding is to treat it as an investment pitch. You need to convince people to donate – so offer them something beneficial in exchange and make them believe in your business concept.
To attract these donations, we offered businesses and individuals in our network a long-term discount on marketing services from our agency with an upfront donation. We decided to approach this discounted rate on an individual basis, depending on what they needed and what we could provide for them.
Using an incentivized crowdfunding approach really helped our agency get off to a strong start for several reasons.
First, it meant that we were able to start off with very little debt, so we were not funneling the majority of our earnings into paying off loans with interest rates.
Second, it helped us source a number of ongoing clients who were clearly interested in the services we had to offer.
Although we initially gave them discounted prices in exchange for their donation, many of them went on to pay for more services at a higher rate – since they loved our work and trusted our company.
Finally, this approach helped us to quickly create a portfolio of work that we used to market our agency and attract new clients. These funders also offered detailed reviews which we used to build trust with new leads.
5. Paige Arnof-Fenn, Founder & CEO, Mavens & Moguls
Mavens & Moguls is a global marketing and branding firm based in Cambridge, MA. I started the company 19 years ago and I self-funded the business.
Having worked as the head of marketing for 3 venture-backed startups which all had good exits I was in a position to be able to launch without taking on any outside money.
Fortunately, the business has been successful so I have not needed investors to fund growth, so the structure remains the same.
There are many benefits to being privately owned and not having a partner so it was the right decision for me.
I realize there are capital intensive businesses where this would not be an option but for a service business like mine it has worked out well.
6. Caitlin Pyle, Founder, Proofread Anywhere
I’m Caitlin Pyle, owner and founder of Proofread Anywhere. I help freelancers earn extra money from anywhere in the world through proofreading.
I did not take out a loan when I started my company, I used my own funds. It took a bit of time to get things going, but it was worth it when things started falling into place and I wasn’t saddled with a ton of debt.
When my company started growing faster than I expected, it was really hard to adapt to the “you have to spend money to make money” mindset.
Having been trained to “save save save” my whole life and as a die-hard clearance-rack shopper, investing money in a new website without the guarantee that it would increase sales was difficult.
Initially, I thought, “Why fix it if it ain’t broken?!” but eventually, I connected the dots and made some big upgrades to my website. It paid off!
7. Niels, Founder, Niels Janszen
I am Niels Janszen, former Microsoft employee, marketer by trade, and self-made entrepreneur.
I funded my first business as a business coach by bootstrapping it on the side – next to my 9-5 job.
I spent 6 months validating my business idea and getting my first clients. Then I transitioned smoothly from employee to entrepreneur.
Now I teach my method to others to do the same.
8. Shantay Carter, Founder, Women Of Integrity Inc.
I am Shantay, and I am a Registered Nurse and the Founder of Women Of Integrity Inc. Women Of Integrity Inc. is a non-profit organization geared towards empowering and educating women of all ages and ethnicities.
In the beginning, I funded everything myself. I also found a mentor to guide me through the process of starting my business. The things I learned from her were invaluable.
Eventually, as we began to grow and take off, my family began to support me and help me financially when I needed it.
In the beginning, you’re learning what works and doesn’t work. I learned early on the importance of networking and how that can help you get funding.
Eventually, as time went on and we built our reputation as an organization, we started receiving grants. We also started hosting fundraising events, which helped a great deal.
I believe when you’re trying to raise money, everything has to be authentic, intentional, and strategic. You also need the support of your community. The people who you’re serving have to believe in your work and the service that you provide.
It’s important to align yourself with the right people who can help with funding and your business.
9. Alex Azoury, Founder & CEO, Home Grounds
I’m the founder of an online business called Home Grounds, that’s now in its 6th year. I had started companies prior to this one, but I’m now happy running a business that is the true intersection of my passion and my skills.
I’m sharing a story that will greatly diverge from the others, but please bear with me.
I started my first business when I was 10 years old. My friends – and other kids in the neighborhood – weren’t allowed to spend their weekly allowance on chocolate or candy, so I figured out a way to profit from that.
I went to the store and purchased all the candy I could with the pocket money I’d put aside. I then sold it to my friends with a substantial mark-up added for my time and ingenuity.
This went well for several weeks until more kids wanted to buy chocolate. I had spent most of my profits and didn’t have sufficient cash to purchase more candy to meet the demand.
Enter my parents.
I asked my parents for an advance on my allowance and promised to do extra jobs around the house to cover that amount. But, after returning from the store that day, I discovered that I had a problem.
One kid’s parent had found out what I was doing and complained about my entrepreneurial spirit, and the “cost of dental work these days.” It was all over. But the loan I’d taken was still due for payment.
I spent weeks paying that money back and, every time I thought I’d finished the last job, there was a little extra task that needed doing.
Here’s what I learned:
- Have ready buyers for your product or service before you launch.
- Monitor the market for changes likely to impact your business model.
- Don’t borrow money from friends or family. It’s likely to cause embarrassment – and a whole lot of questions when things go wrong.
- Know that you’ll still have a debt to honor if your business fails.
- Always set aside funds for unforeseen circumstances.
- Lenders always want payment with interest, so keep your borrowings to a minimum.
10. Christine Wang, Founder, The Ski Girl
I am the founder of The Ski Girl and after having decent success with my first business, I wanted to share how I was able to fund the endeavor in hopes of helping out other potential entrepreneurs.
Having enough initial capital to get started is a major hurdle for many and I know there are many ways to go about it. I was lucky to be able to save enough money to get my business idea off the ground while still working my 9-5.
It took almost two years from my initial idea for a skiing website to become a full-time business. In those initial phases, I saved as much money as I possibly could to go towards building the site and idea.
It wasn’t easy and I had my fair share of ups and downs along the way. I had to make sacrifices in my travel and leisure for that time. But it worked.
I was able to leave my office job and now I comfortably run my own thing. It’s one of the best feelings I’ve ever had.
If you have a business idea that doesn’t require a huge amount of money upfront, I would suggest trying to save and pay for it yourself, rather than borrow. You’ll see profits quicker and maintain more control that way.
Building a startup? Build it on a .TECH Domain!
11. Allan Borch, Founder, Dotcom Dollar
Funny enough, even though I studied civil engineering at university, I found my first venture to be an ice cream shop.
Believe it or not, the ice cream shop I owned was funded by my salary from my work as a civil engineer. I was getting compensated fairly well due to my long hours at work and it was easy for me to save and open up my own store.
I started Dotcom Dollar to help aspiring entrepreneurs create a successful online business while avoiding crucial mistakes along the way.
When I moved into e-commerce and SEO, I used a combination of the funds I earned from my old shop and the money I was earning from my day job, until the income I generated from my e-commerce business matched the salary I earned from my day job.
I guess even before, I have always been a little reluctant to function on loans alone, so I drove myself to work as hard as I could and save as much as I could for independent funding.
12. Carolyn Cairns, Marketing Manager, Creation BCI
Although I am a marketing manager, I still wanted to have a business of my own and I decided to start one. The only thing that held me back was the thought of how I would finance it.
After endless nights of thinking, I finally decided to self-finance. I made a list of things I should prepare to start my self-financed business.
I had to make sure that I had a clear idea of what my assets are – real estate, savings accounts, vehicles, and other investments. These were the key players in my capabilities to self-finance my startup business.
Starting a business that is self-financed will require a lot of time and effort and you really have to be decided about it. It requires a well-thought combination of assets, cash flow, and a whole lot of savings.
I suggest that you keep a timeframe so that you will have enough good pressure on yourself to get things done the way they should be done.
Success will not be an easy journey but it’s worth it because you wouldn’t have loans upon loans to hold you down. What you will have is a hard-earned, self-financed business that you can call your own.
13. Jeremy Harrison, Founder, Hustle Life
I am Jeremy Harrison and I run a blog called Hustle Life, which is a resource I created for people looking to find their perfect side hustle.
I started the blog because, over the past five years, I have experimented with many different businesses with various degrees of success, and I wanted to help others find the right second job for them.
When I started my first business, I only had my life savings. I thought that would be enough since it covered all the startup costs I projected. Boy was I wrong.
As days went by, I realized I needed more funds to maintain my business. So I gathered all my data and information and presented it to my family and friends. I needed help and asked for some loans.
Unfortunately, it still wasn’t enough, so I had no choice but to get a microloan. These smaller loan sizes are offered by Microlenders, usually require less documentation than banks, and often apply more flexible underwriting criteria.
There are a few hundred microlenders throughout the U.S. and they often charge slightly higher interest rates for loans than banks. Thanks to them, I was able to run my business smoothly and have now paid off all my credits!
14. Jayson DeMers, Founder & CEO, EmailAnalytics
My name is Jayson DeMers, and I’m an entrepreneur and business owner of EmailAnalytics, a productivity tool that visualizes your email activity – or that of your employees.
I’m a long-time columnist for Entrepreneur, BusinessInsider, Inc, and various other major media publications, where I cover marketing & entrepreneurship.
My first business was funded by my own savings from my salary at my full-time job. It started as a side-hustle while working full-time.
I remember coming home after work and then working another 4-6 hours every night, as I worked on growing my side-hustle. Eventually, profit from my side-hustle equaled earnings from my full-time job.
At that point, I made the decision to quit my full-time job and go full-time with my side-hustle, which became my primary focus.
This approach needed a lot of hard work, but it enabled me to “safely” make the leap from employee to self-employment, as I had a safety net from my salary while starting my own business.
15. Melinda Nicci, Founder, Baby2Body
I came up with the idea for Baby2Body shortly after I had my first child back in 1994. I noticed that there was a huge gap within the fitness industry when it came to pre and postnatal needs.
There simply wasn’t anything that catered to this stage of a woman’s life in an easy to access way, at that time.
I had a degree in psychology and was a qualified personal trainer. I started working with women who wanted to safely maintain their fitness during pregnancy and then get their pre-baby body back after birth.
We sourced funding for the first phase of Baby2Body through a TSB proof of market grant. I spent several months on market research.
While putting together my pitch, and really just had a PowerPoint presentation and my 20 years of experience in women’s health and fitness, and I took that to an early-stage venture fund.
At this point, we got our next batch of funding that helped me take my idea from paper to an actual business. Through that, we received in-house support on early stages of tech development, marketing, and strategy and it led to the launch of the very first rendition of Baby2Body, an email newsletter.
We gained so many insights in those early days, and it has all led to what you see now as a full-fledged product experience in our application.
16. Lewis Keegan, Founder, SkillScouter.com
I am Lewis Keegan, Owner of SkillScouter.com, a company that aims at helping potential students find their learning paths via online learning platforms.
I saved up to fund my business in the first few years when I started it. I have always made it a point to include my business in my plans, and therefore, I always set aside a portion of my income so that I can save enough to start my own business.
Funding your own business is better than taking a loan to start it because what if an unforeseen event happens? What if you take a loan and the business you started didn’t grow as expected?
Now you have to deal with your losses and settle your debts at the same time.
This is mainly the reason why I made sure that before I started my business, I had already saved enough to fund it on my own.
17. Daniel Ternyack, Co-Founder, Onedesk
Onedesk is an online workplace management platform.
To get my tech startup off the ground, I decided to bootstrap the company with my partner and not take on any external capital.
Software as a service (SaaS) business can be run with incredibly low overhead costs, and many founders are able to keep burn rates to a minimum.
I always recommend first-time business owners to consider bootstrapping their business and staying cost-sensitive in the early stages so that they can maintain equity over the long term.
18. Asel Mukambetova, Founder & CEO, SelfLawyer
My name is Asel Mukambetova, Esq. I am the CEO & Founder of SelfLawyer, an online legal services platform focusing on immigration.
I didn’t get any financial backing when I started my own legal practice right after graduating from Columbia Law School. I was lucky to grab an opportunity in the immigration services market, connect with the right audience, and build my clientele.
I was able to start my current business (online immigration services & software) only after saving enough money to cover 1-1.5 years of living expenses.
I would recommend starting small, connecting directly with the customers, and focusing on customer service. There will be a lot of challenges along the way but believing in your idea and focusing on your customers will eventually bring success.
19. Josiah Mann, Founder, Investor Deal Room
Initially, I planned to bootstrap my business as a side project while working my full-time job.
While getting started, I cold-called and emailed around a hundred potential customers for the product I was building in order to find some early adopters. One of these early adopters thought the product was a great idea and offered to invest in my company so I could work on it full time.
20. John Dirugeris, Founder, John Dirugeris Marketing
My name is John Dirugeris, I am a freelance digital marketer and social media professional. When I was 19, I wanted to start my own business and live on my own terms. To do this, it took some upfront capital for education and the training.
For an early Christmas present, my late father helped me purchase Tai Lopez’s Social Media Marketing Agency Course for USD 1,000. The course was 3 months long, but it only took me 4 weeks due to my eagerness to get started.
After finishing the course, I realized I can get the information for free online on YouTube and other social channels.
So, with all this being said, my message is this: if you want to start an online business or any business at all, look online first.
Look on YouTube. Look for people doing the exact thing that you want to do, and see how they are doing it. There is so much free information out there that is up for grabs, you just have to grab it.
Now, I know my business is online, so if you are wanting to start a brick-and-mortar business or a business that requires upfront expenses like materials and such, I would definitely say it costs a lot more than USD 1,000.
Either way, your network, and the Internet can teach you a lot about how to get to your dreams through your first entrepreneurial endeavors.
Building a startup? Build it on a .TECH Domain!
21. Lucas Horton, Founder, Valeria Custom Jewelry
After miserably working in the corporate world for 10 years, I bought a pair of diamond earrings on eBay and sold them on Craigslist. I made USD 50 and an idea was hatched.
Enrolling in a jewelry fabrication class, I also earned the GIA Graduate Gemologist degree. I eventually learned CAD (computer-aided design) jewelry design, which is all I do now.
I began my business while still working at a full-time job, which was crucial in helping me not take on unnecessary debt while growing my business in the initial years. It was also of great help emotionally as I knew I still had a paycheck coming in and didn’t have to worry about slow sales for a long time.
Once that disappeared, it was a different story though. If it is, at all, possible to keep an existing job while you solidify your new enterprise, it will be immensely helpful in many other ways as well.
In 2010, two years after starting my business, I was laid off. After that, I relied heavily on credit cards offering an introductory period with no interest. If I had not paid the balance off at the end of the intro period, I would roll it over onto a new card. This usually only cost me 3%, which is still far less than the 18-26% credit cards will charge on an existing balance over the 12-18 interest-free months.
I used these cards any time I had a large purchase to make or, more recently, I applied for one at the onslaught of Covid-19 as a precaution against slow sales.
These approaches won’t work for everyone though. For the first one, you need a job. For the second, you need a good credit score to qualify for the no-interest offers.
22. Brian Robben, CEO & Founder, Robben Media
Robben Media is now an international digital marketing agency, but here’s the story of the initial days.
With no money starting out, you cannot fool yourself to think it’s time to focus on anything besides generating cash flow for the business.
To do this, I started going door to door across the city to walk in on business owners, asking them what they did to generate new business and if they were using Facebook Ads.
If it sounded like they were a good fit, I would pitch the benefits of my services and see what they needed.
While 95% of the time I was rejected, this did result in over USD 50,000 in new business in those initial months.
I would say it worked out!
23. Saurabh Bajaj, CEO, Swiftlane
My background is in software engineering, most recently working on developing computer vision for self-driving cars at Lyft.
I started Swiftlane about a year and a half ago, to accelerate the positive use of AI and technology.
I started by self-funding the business for the first few months. I also invested in interviews with people in the industry on the key pain points, developed the product specifications, and built a rough plan of action for developing this product.
Once I had a clear idea of what needed to be done, I started reaching out to venture capitalists in the San Francisco area, in order to pursue developing an early product, with a team of engineers.
I raised pre-seed funding from Bloomberg Beta, and many other angel investors, to get the first version of the product built and shipped to paying customers.
We raised a lot more money with a larger number of investors in order to bring the Swiftlane technology in the hands of hundreds of businesses, starting this year.
24. Bob Bentz, President, Advanced Telecom Services
Advanced Telecom Services was founded in 1989. From a start-up, it grew up to generate USD 62.2 million in annual sales with offices in the United States, Canada, United Kingdom, Czech Republic, and Taiwan.
When the company started, I was in my 20’s and the only thing I could do to raise money was to take out a second mortgage on my house.
We got through the early years via extreme austerity. That meant no salary for the owners for two years plus an array of cost-saving measures.
Since my business was in a different state than my home, I slept on the couch in my office and took a shower at the YMCA each morning.
For lunch, instead of ordering sandwiches, we went to the grocery store and bought a loaf of bread and some lunch meat.
At the time, faxes were relatively new. We found one retail store that allowed outbound faxing for free, but you had to pay for inbound. And, we found another store that did the reverse. So, we took advantage of the free offerings at each.
I never wanted that next expense to be the thing that put us into a situation where we had to close shop.
25. Stephen, Founder, Financing Solutions
Over the last 20 years, I have built 6 companies from scratch. They have been in the USD 5 million to USD 25 million in revenue per year range.
One made the Inc 500 fast-growing and another will be making the list this year.
Too many people today believe that you need money to start a business. Over the last 25 years, I have built 6 companies and none of them had any outside investors.
The first company I started, was a digital printing company and I built that company based on its existing cash flow. This has been consistent with all of my companies.
Existing cash flow means that you reinvest the profits back into the business.
The second company I built might be a better example of what you might be looking for.
I started a company called Expertseeker that placed technology consultants on long term assignments into fortune 500 companies. I grew that business to USD 6 million in yearly revenue before I eventually closed it.
I had to always carry a pretty big payroll, something like USD 500,00 per week. When I started the business it grew fast. Too fast for me to use my existing profits to carry the payroll. However, I thought that once I was able to show a financing company the revenue I was generating, I would get financing.
That’s exactly what happened. I found a Factor who was willing to buy my invoices and advance me the money. After 18 months I was doing well enough that I was able to move to a better Factor and then eventually to self-financing.
Nowadays there are so many ways to get funding for a business, that anyone who uses an excuse like “I don’t have any cash to start a business” is just making excuses. If you want it bad enough, you will figure it out.
26. Jeffrey Ma, Founder, dcyphr
My name is Jeffrey Ma, and I am a student at Yale University and the founder of dcyphr.
dcyphr is a platform for users to read, request, and contribute distillations of academic research so that it is more accessible to the public by removing the paywall and readability barriers.
I funded this venture with VC grants so far. I believe in a lean startup model that does not have high operating costs.
We have managed to keep costs low by only paying for necessary resources such as web hosting services and domains.
The community that contributes to dcyphr is incentivized by the vision of scientific transparency and delivering on the promise of Web 3.0.
27. Shaun Poore, Founder, Failure Mountain
For my first business, I sold white label products on Amazon FBA under my brand. I funded it the same way all red-blooded Americans fund everything; personal credit cards.
For the FBA business, I had to risk a few thousand dollars for the initial shipment of inventory. But after that sold, I was able to reinvest the profits for the rest of the way.
This is not unusual. In fact, according to the SBA, most businesses are self-funded.
28. Ted Chan, Founder, CareDash
CareDash is a healthcare directory with nearly 2M patient searchers a month.
I started CareDash while enrolled in the MIT Sloan MBA program, and the capital came from the living allocation portion of my student loans.
I ate a lot more ramen and skipped out on some of the big expensive trips and indulgences MBA students sometimes make.
This freed up about USD 15,000 to hire offshore developers to build the initial technology and get it into the Apple and Android App Store where it scaled.
I’ll add that, starting a business while you are in grad school can have a lot of advantages. There’s a whole ecosystem of potential advisors, experts, and smart people to bounce ideas off.
29. Lori Cheek, Founder & CEO, Cheek’d
After finishing off my savings from my 15-year career in architecture, bootstrapping my business for several years, I had to get extremely creative to continue funding my business and this is where the financial sacrifices began.
I made nearly USD 75,000 by selling my designer clothes at consignment shops and on eBay, doing focus groups, secret shopping, app testing, dog walking, house sitting, watering plants and by selling my electronics and other odds and ends around my apartment on Craigslist, all of which went straight back into my business.
The biggest chunk of cash came from renting out my West Village Studio in NYC on AirBnB, while I couch surfed for 14 months, nearly got evicted, and ultimately lost my lease of 5 years in my gorgeous apartment.
Then I took my shot at getting funded on national television on ABC’s Shark Tank. Although I suffered a brutal bloodbath on the show, and all five sharks told me to quit my hobby and go back and get a job in architecture, I ended up raising over 5 times the amount I’d sought on the show.
I also got a CTO on board who’s helped facilitate and finance the new face and technology behind the new Cheek’d.
The newly launched dating app allows users to solve missed connections with a new technology that was not available when the patented Cheek’d idea was launched in 2010.
It was only a matter of time and I’m thankful I didn’t take the Sharks advice to quit and move on.
30. Daniel Brassloff, Founder, Freed Pizza
I founded Freed Pizza because I was dissatisfied with gluten-free pizza options in the market. I created a gluten-free mug cake brand (MuggedCake) and spent a semester in college studying Gastronomy in Barcelona.
After months of experimentation and being laid off, I set out to launch my own brand. I started Freed Pizza from scratch without outside financial backing, as a sole founder. I was able to do so with my prior knowledge of dry packaged food products from a previous business.
I am involved in the Boston-area food business community, including organizations such as Branchfood, which allowed me to connect with a restaurant owner that, upon my confirmation of food business liability coverage and ServSafe certifications, allowed me to produce my products on site in a section of the restaurant, otherwise going unused at the moment.
Leveraging resources like that allowed me to produce my first 100 unit batch without any outside capital.
I taught himself how to use a free design program which allowed me to create my business’s logo and packaging design.
My aim was to make others, who were trying to start small food businesses, look towards dry products, which have a longer shelf life than other food products and are much easier to produce and ship.
If others are looking to make a similar type of product, I encourage that they look into small unit orders of stand-up pouches, OnlineLabels for printable packaging labels, and collaborate with local businesses who may very well be able to allow you to produce on-site.
Building a startup? Build it on a .TECH Domain!
31. Dan Bailey, Founder, WikiLawn
I originally funded my business through the aid of personal savings and a small business loan. I’ve had a business that was funded primarily by investors, but I strongly prefer not handing over that much control of the company to people who are primarily interested in turning a profit.
That’s not to say investors aren’t the right decision for some, I just found loans more manageable. It can however be difficult to get a business loan, especially starting out.
I think right now, hopeful business owners may find terms a little more relaxed, as the market isn’t great for people wanting to start a new business, and banks may exercise leniency in the interest of keeping loans going.
32. Sunny Ashley, Founder & CEO, Autoshopinvoice
Autoshopinvoice provides shop management software for independent auto repair shops and garages. Currently, Autoshopinvoice is 100% bootstrapped.
To save on development expenses at the beginning, I taught myself to code in order to begin building our software application myself.
It helped that I had taken a computer science class in college and also had some frontend coding experience from a previous role. This made things easier, but there was definitely still a learning curve.
33. Robert Brill, CEO, BrillMedia.co
BrillMedia.co is a digital advertising firm built to grow companies with precision marketing and advertising. I self-funded BrillMedia.co out of savings I had from 10 years in the advertising business.
The core learning is that we have either time or money. If we have money we can learn faster, but it will cost money. If we don’t have money, then we have time, and we’ll learn slower while preserving capital.
We chose the slow route because our goal was to create a foundation that was set for long term success.
We learned during the first year and a half of the business about the right product/market fit. Had I spent money marketing our business then, or hiring expensive salespeople, we would have been promoting the wrong messages and products.
34. Matt Bentley, Founder, CanIRank
My name is Matt Bentley. I’m a Stanford engineer turned data scientist who’s been working on entrepreneurial projects for the last 20 years.
I founded CanIRank, a fully remote digital marketing consulting firm that specializes in analyzing complex data to deliver high-value data-driven SEO results. Starting my own company from scratch was intimidating and required a thorough plan.
When I started CanIRank, I knew it was going to be a long and exciting journey with many twists and turns.
The first step would be spending months (maybe years) identifying and analyzing trends in how Google ranks websites. When I had that baseline understanding, I would build an AI tool so that anyone could punch in a valuable keyword and receive actionable steps to improve their website, and thus, Google rankings, web traffic, and revenue.
Rome was not built in a day, and CanIRank certainly was not either. I had lived frugally and saved up some money over my first 10 years in the workforce, which set me up with a bit of a buffer to invest when I needed to build my dream program.
I considered outside investors, but independence is important to me, and I always aspired to successfully start my own business with my own money on my own terms.
Over several years, I lived frugally and worked seemingly all day, every day, but the grind was worth it. The software has expanded a ton.
CanIRank now employs a team of 20 employees and offers consulting services for e-commerce, SaaS, and other businesses.
I’m extremely proud to say that I was able to turn my pipe dream from over a decade ago into a profitable business, by investing my own money and time.
35. Tyler Kastelberg, Founder & CEO, Bullpen
My name is Tyler Kastelberg, and I am the Founder & CEO of Bullpen. My passion for both commercial real estate and the gig economy led me to create a software company that helps talented real estate professionals leave their “9-5”.
Bullpen is a web-based, commercial real estate freelance marketplace. However, it did not start as a software.
When I became an entrepreneur, I had little money and no connections to raise a seed investment. To test my idea and fund software development, I first created a consulting business that gave customers a chance to outsource their real estate analyst work.
Feedback from customers shaped Bullpen’s value proposition, and the money earned from the consulting business funded the software development costs.
In other words, I “revenue funded” the development of Bullpen, and we are still revenue funded today.
36. Meredith, Founder, SenecaWorks LLC
My business teaches go-getters to write winning grants through an online course experience. While this is the business I always wanted to build, it was bootstrapped by consulting and sharing “slices of pie.”
Consulting can be draining, but it’s the cheapest and easiest business to start. You need a computer, internet, and someone willing to pay you.
I’ve learned that the first business you build, may not be the business you ultimately want. However, if you start with a consulting practice, you can take your earnings to bootstrap the business that truly fires you up.
Sharing slices of pie is the other secret ingredient to my bootstrapped operation. The concept was developed by Mike Moyier, to address the issue that the workload rarely splits up evenly and that eventually leads to business partnerships falling apart.
To resolve this, the Slicing Pie model says your share of equity in the startup is equal to your contributions of time and cash. Since the company cannot afford three full salaries, compensation is split between cash and earning slices of pie (i.e. ownership in the company).
Sharing equity in the company provides an incentive for others to help build it and share a founder’s mentality.
If you are an early-stage startup, consider using the Slicing Pie model to build your company and team. You know you have the right people surrounding you when they are also willing to take a risk to build something great.
37. James Canzanella, Founder, Isolated Marketing Nights
IM Nights is dedicated to helping you build and grow your online business with the help of software.
Given the fact that I was unemployed, I started my first business with very little money. Because of that, I had to be as lean as possible, and when I desperately needed money, I had to, unfortunately, start selling some of my valuables and collectibles. It was something at the time that I had to do, but looking back, I wish that I didn’t.
Another way that I funded my online business was by recycling cans and bottles. I looked anywhere that I could to get my hands on bottles and cans, even from parties of friends, and it worked very well.
Despite the fact it wasn’t what I wanted to be doing, this allowed me to get enough cash flow to invest in my business, make more money, and finally be in the green. It was a good thing that I lived in CT at the time, because not every state allows bottle redemption.
38. Joshua Strawczynski, Founder, JMarketing Agency
I decided to use my own money when founding my agency. I didn’t have to, there were investors offering me finance, but I took advice from a friend/mentor who said, to be successful you need skin in the game.
In fact, his exact quote was “Burn the boats” which is an old wartime saying derived from when raiding a foreign land. The generals would instruct the men to destroy their only mode of transport home, thus sending a strong signal that they have to win the fight, as there would be no retreat.
I took this message to heart, and after years of dabbling at the business, I put all my cards on the table. The results proved the concept. I found myself working harder, smarter, and longer.
The results of the company flourished, as I didn’t have the cushion to fall back on, it was sink or swim, and that was highly, highly motivating.
39. Carl Dameron, Founder, Dameron Communications
My name is Carl Dameron and I started My advertising and public relations agency Dameron Communications in 1989.
I started after I was let go from another company that went bankrupt. I started my new company with my last paycheck working out of my bedroom and I walked out the door and worked the phones and got new clients.
I was profitable in the first month. So the funding came literally from client work. My new clients funded my business as I worked my profit into each deal.
40. John Pinedo, Founder, Freedom Bound Business
I’m an online entrepreneur, and I can tell you how I funded my first online business – my online business blog. It’s not particularly glamorous, but it’s how I did it.
I started out working at a digital marketing agency where I was in charge of multiple client campaigns. Throughout that experience, I started getting a lot of experience using popular tools of the trade for SEO, PPC, email marketing automation, call tracking, and customer relationship management software.
I put money aside each month to purchase one software for a month and then write article content about it with my SEO skills. I’d rinse and repeat each month, expanding from the tools we used at work, and my articles started to rank, and this led to my first successful online venture.
41. Mark Aselstine, Founder, Uncorked Ventures
I am Mark, the owner of Uncorked Ventures, an online wine club, and gift basket business based in the San Francisco Bay Area. A husband and dad of a couple of boys first, entrepreneur second.
So, we funded our business the old fashioned way. We convinced our wives that our business was a good idea, at a wedding 5,000 miles away from home, at about 3:00 am, when the stilt walkers and other circus performers came out.
We were many Pisco Sours in by that point. So they agreed to let us write checks from savings to make it happen.
42. Bryan Clayton, CEO, GreenPal
I’m Bryan Clayton CEO of GreenPal which is best described as Uber for Lawn Care.
Debt can magnify mistakes however when used wisely it can be a powerful fulcrum.
When we launched our business two years ago we had no collateral or money and no outside capital to get started with. Like most tech startups, we went on the fundraising circuit talking to angel investors and venture capitalists, begging for money to get started.
However our vision was just too broad in scope, and luckily, we got turned down and were refused over 40 times.
I was fortunate enough to have solid personal credit and this enabled my team to secure an unsecured line of credit for USD 85,000 to get our business started even with no collateral.
We paid that off in the first year and this year we’re going to surpass USD 13 million in annual revenue.
Good thing early investors told us no because with their capital they would have owned and controlled 30% of our business. Today, because we are self-funded, my co-founders and I own it all.
In Conclusion
It is safe to say that the leading tech titans around the world were all startups at some point. These prosperous businesses are the only 6% who recognized the right way to fund their new startups.
Even the brightest minds with the best business ideas fail due to a lack of funding options. Some face rejections in the earlier stages and give up, others have beliefs that are too strong to get bogged down, and somehow, they find their way to the top.
Although it’s crucial to find the right startup funding option, it is always available for those who seek it. The real question is,
Do you want it that bad?
