You Can't Get VC Funding for Your Startup. Now What?
When push comes to shove, a good idea, even a great one, is nothing without the practical back end. And it's at this point that young entrepreneurs who can’t self-fund their startups or obtain money from friends and family traditionally realize their limited choices: angel investor, crowdfunding or venture capitalists.
The problem is that angel investors are hard to find and even harder to lock down; and crowdfunding not only includes platform fees but is not very effective for non-consumer/B2C services.
The logical choice, therefore, becomes VC funding. To go this route, startups must partake in a tedious and long process that doesn't guarantee success. And at the end of the process, most startups are still rejected by VC investors: According to Fundable, only .05 percent of startups are funded this way.
So, what to do? Entrepreneurs may feel helpless and unsure of the other alternatives they have, but they should take heart because there are other paths to take to launch a company, some very popular, and others virtually unknown. Here are a few options:
Corporate venture capital funding differs from regular VC funding in that larger corporations help fund your startup, as opposed to limited partners/investors or venture capital firms.
CVC funding is an opportunity for startups, particularly tech startups, to get a head start. This method is popular because individual startups are generally granted greater independence, compared to what occurs with standard VC funding; but entrepreneurs must be mindful that it may limit their own decision-making flexibility on strategic options.
Many private companies and non-profits offer small loans that range between $500 and $50,000, with the average around $13,000. Examples of microloans include SBA and small office/home office loans, known by the acronym SOHO.
Peer-to-peer (P2P) lending offers another solution for small businesses. With this model, borrowers and lenders are connected via various online platforms. Loans here usually range from about $1,000 to about $35,000, and there is about 5 percent in additional closing costs.