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 This guest post was written by Dana Mauriello, Co-Founder & President of Profounder.com. Dana was part of starting and running multiple family businesses and has lived, eaten, and breathed entrepreneurship for as long as she can remember. She is the master of developing a deep customer understanding and applying this empathy to creating, marketing, and selling outstanding products. She created a unique major in Product Development at Stanford. Working on the Corporate Product Innovations team at Estee Lauder, she created new product concepts and brought them to market. She also graduated from the Stanford Graduate School of Business in 2009, is a champion powerlifter, and die-hard New Yorker.
I’ve been around small business entrepreneurship my entire life – my family came from Italy with a garbage business and we’ve since started an exercise equipment manufacturing company, a nutritional foods company, and quite a few others. I learned a lot from those start-up experiences and fell in love with the idea of entrepreneurship early on.
I was lucky enough to go to the entrepreneurship mecca at Stanford for undergraduate and business school and see a different approach to building a business than the very grassroots approach that I was used to. When I’m not thinking about new businesses, I’m either searching for new cosmetics (I worked for Estee Lauder & L’Oreal in Product Innovations and still love that world) or lifting weights (I’m a competitive powerlifter).
Here are a few creative ways to fund your dream business’ that I have seen:
1. Pre-Selling Product
I’ve seen this example with a company selling video games and another making custom computers. Each company reached out to their potential customers and asked them to pay for the product up-front before it had even been produced. The price was at a discount to compensate for the risk of paying before the product is made. With this money in hand, the companies could then fund production.
2. Selling discounted gift certificates
A few restaurants I know of have successfully used this method of fundraising. The restaurants sold their customers a gift certificate for many dinners at a discount (ie, pay $2500 and eat $3000 worth of food). They got the money in the door up-front and used this to pay outstanding bills or make necessary improvments . Although the examples that I’ve seen have been with existing businesses, there’s no reasons that this would not work with a start-up business as well.
3. Developing Strategic Partnerships
I have a friend with a consumer product business that has high manufacturing costs. He had a personal relationship with a factory owner in China and offered this individual equity in his business to defer the upfront cash expenses associated with manufacturing.
4. Crowdfunding from Classmates
Two business school classmates who were starting a technology company reached out to the rest of our class to invite them to participate in funding the business. The timing was right around graduation and many people were eager to participate so that they could support a fellow classmate that they believe in and be engaged in entrepreneurship even if they are not starting a business. This is funding method is quite difficult to coordinate independently with lawyers and this case study is part of what inspired ProFounder and motivated us to create a system where funding like this could be easily facilitated.
5. Crowdfunding while supporting a non-profit
I haven’t seen this done yet, but I’m very eager to see it happen soon on ProFounder. Through ProFounder, community members can invest in your business and get their money back plus an annual reward payment that is equal to a percentage of your revenue. Some investors may choose to be “cause” investors and their reward payment will go to a non-profit instead of being sent to them directly in cash. For example, an icecream shop may get funding from local families who direct their dividends to the PTA at their children’s school. In another example, an alumni may invest in a student business and direct their reward payments to entrepreneurship programs at the University.
I’ve worked on numerous small businesses with my family all of which have been funded through friends & family, but ProFounder is my first experience starting a company that has pursued funding from professional outside investors. The key lesson that I learned from this fundraising experience is to leverage your investors and take advantage of the feedback and connections that they are willing to offer.
It may seem obvious, but it certainly rang true for us that the best way of getting in touch with additional investors is through the introductions your current investors.
Don’t be afraid to ask for help! Some of the entrepreneurs who approach us about seeking funding are anxious about reaching out to their community for funding and support. If you believe in your business then you should also believe that you are giving people an amazing opportunity by inviting them to invest. When you ask people to get involved, they will feel invested in your success (and hopefully, through our platform, they literally will be invested) and eager to continue to provide help.
About edith
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Edith Yeung is the Founder of BizTechDay and SFentrepreneur. She is also a lecturer at UC Berkeley International Program and committee member of the San Francisco Small Business Week. She has previously worked with AT&T Wireless, Oracle, Siebel, Autodesk, Cisco Systems, Symantec, American Management Systems (AMS), Telstra Australia, Matav Hungary Telecom and Taiwan Semi-Conductor. |
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