

Ask HN: What are some ways to raise money for a startup? - imwhimsical


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drelihan
I guess it depends on what you are raising the cash for and how much you need
to raise. If it is mostly to give you and/or your team a living stipend while
you develop the product full-time, there are a number of tech incubators you
could choose from or you could try to raise a few months salary from angel
investors like me.

If you are using the cash more to buy an asset or equipment ( e.g. a food
truck ), then you could try pitching it to a bank. I don't think they would go
for it, but at least they would have collateral. If you have a personal car,
you could try offering that for collateral as well.

\- Part-time consulting. If you are able to consult 20 hours a week, that
should be enough cash to cover a modest cost of living and maybe some extra to
invest in your start-up. A lot of companies start this way. They build
specific products for their clients and eventually develop a product/service
of their own. Check out 37Signals story on how Basecamp came along.

\- If you are developing an enterprise-level tool, you could try to pre-sell
it to a large firm first and have them pay an advance. This is tricky, but
possible if you are building a certain type of product and have the right
experience/connections.

\- Build an MVP in your spare time and start charging for it. You may be able
to skip the financing step altogether. Either way, you'll have more luck
raising funds if you already have some, but maybe not enough to be profitable,
paying customers.

\- Personal Savings

Some riskier ways to get cash:

\- Cash in a portion of your 401k ( you'll pay a 10% early withdrawal penalty
+ taxes )

\- Home Equity Line if you have enough equity in your home. Careful with this
because you are gambling your home. Make sure that if the start-up fails,
you'd be able to get a job making enough cash to cover the additional debt
service on the equity line.

\- Personal line of credit. You pay high interest rates and won't be able to
borrow that much ( ~25k or so ). You've probably gotten offers like this in
the mail before. Your credit card company sends you a blank check and says 6
months no interest loan. Same as above, if the startup doesn't make it, make
sure you'll be able to handle the additional finance charge ( which will be
crazy high ). Please don't do this one.

~~~
speeder
I am co-founder of a startup that have some products with kinda average
traction (but no profit), and not enough money to finish our flagship product
(but I think we can make a the rewrite of the demo... the first demo is on
Google Play).

How I would convince a angel investor like you to help?

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bobbaddeley
Friends and family is an important one. It's not a lot of money, but investors
are a little like sheep, and if you can show that you've been able to convince
some investors and are committed enough to beg and borrow from your own
family, then they are more likely to be interest.

Getting paying customers is the best way to raise money. No equity given up,
proof of your business model, and that looks great to investors later on, too.

Incubator programs aren't all created equal. Do a LOT of work to vet them
first. Many will offer a small amount of money, offer very little support
during the incubator, have no connections at the end of the incubator, and
then dump you with no support after the incubator, but kindly taking a percent
of the company. There are some good ones, though.

Angel investors and VC are an option, but those are not easy to get and you
have to kiss a lot of frogs before you find your prince.

The best thing to do is build your product and keep building it, and talk to
as many people as you can. Resources will come out of the woodwork slowly, and
connections will be made that will lead organically to what you need.

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merinid
Build a prototype/mvp/alpha/demo product. Something. Anything. Then depending
on the type of startup, there are so many ways to get started. If you live in
a big city, go to tech meetups and start gathering contacts who will help you
get to angel investors. Or apply to incubator programs like YCombinator (there
way more of these than you think). Regardless of the avenue, i repeat, work on
your product and your pitch. Neither come easy.

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imwhimsical
I find none of the answers here will work for me. I'm looking to make a small
product, which I believe is a great idea. I need to hire designers and
developers every now and then.

Borrowing money from people is not an option, and neither is will banks help
me in any way — I'm a student,and 17 years old.

I have little or no savings. So yea...

~~~
speeder
Sometimes, you need to strike lucky (like me... that a guy with the money and
the same idea as me found me and offered me to code)

Or do like I tried to do in the past: work in a normal job, and in your idea
on the side. (this resulted into this: [http://www.abril.com.br/blog/campus-
party/2011/01/19/fanatic...](http://www.abril.com.br/blog/campus-
party/2011/01/19/fanatico-por-jogos-leva-seu-proprio-fliperama-para-a-arena/)
)

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jamesjguthrie
IMO, the easiest way is to borrow from a bank.

If you're in the EU the EC give out startup grants. In Scotland we get them
through our local Councils.

~~~
merinid
Practically impossible to get a loan for a startup in the US :( Anyone have
experience with this? Would be very curious to hear about it.

~~~
bobbaddeley
We've tried this. Banks won't loan unless you have prior success in that
business. Only a few do Purchase Order financing (where you show them a list
of pre-orders that you need money to service) and it's expensive and also
requires prior success. All would require a personal guarantee. I had one tell
me they wouldn't loan unless I had the amount of the loan in an account at
their bank. What's the point of that? Generally speaking, U.S. banks are
worthless for startups, unless you want to fund your business with credit
cards.

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scottbartell
Look into crowdfunding. You don't have to give away any equity and a
successfully funded campaign basically validates your MVP.

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whichdan
Have you looked into angel.co?

~~~
speeder
Alright, a person create a profile there, that get no views, no references,
and then so what?

~~~
smartwater
There is going to be work involved somewhere. It's not going to just fall on
your lap.

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sharemywin
nobody mentioned kickstarter.com

