How Can I Fund a New Business Idea Without Crowdfunding?

By Ryan Himmel

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

My partners and I have an idea for a new product. We know what the market will be, why and where, but we simply can't reveal the product at this time on any crowdfunding website. Banks won't touch us. Any suggestions as to how we can finance it?

While crowdfunding sites have opened the door for many entrepreneurs who couldn't otherwise obtain outside financing, they are still not the best option for everyone. Case in point: those entrepreneurs with a highly confidential business model. However, you shouldn't always consider the absolute worst-case scenario when sharing your ideas with others. A crowdfunding site may provide you with instant market feedback that you may not gain from an individual investor or a consortium of angel investors. So what are your other options?

Have you reached out to accredited investors in the angel community? Nowadays, there are many online angel communities, such as AngelList and Gust, that provide early-stage companies with immediate access to accredited investors and vice versa.

Incubators and accelerator programs can also be very helpful. The notable ones of late include Y Combinator and Techstars, but there are many popping up across the country. They typically provide only a limited amount of capital, up to $25,000, but you'll have access to very sophisticated investors who are itching to invest in startups. In many cases, being accepted into one of these programs gives prospective investors comfort that you're working on a "big idea" concept or a product that will be a game-changer in an existing market.

Another option is to seek an introduction to venture capital (VC) firms. Please note that the market has dried up recently and VCs are becoming more and more selective with their funding approach. It's best to try to get a warm introduction to the fund as they are often overloaded with pitches. You'll also want to pursue a VC that has invested in companies in your industry before and has the experience to help your company grow. Do some due diligence; don't just pitch every VC you can.

I hope you find this information helpful in reaching your financing goals. Let us know how it all works out and how you do end up getting funded.

Ryan Himmel

Head of Financial Partnerships, Xero Americas

Ryan Himmel is a CPA and financial technology executive who has dedicated over a decade of his work toward providing solutions to help accountants and small-business owners better run their firms. Himmel currently leads financial partnerships in the Americas for Xero.

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