One common question I hear far too often: where are the investors interested in non-tech companies with viable business plans and ready-for-market consumer products? It can be frustrating when all we hear about are angels and VCs with money to throw at any tech startup with a good idea and a business plan.
It isn’t that funders for traditional products don’t exist. However, unlike with tech, there isn’t a central place like Silicon Valley where there is a significant concentration of investors. Entrepreneurs have to think a bit more creatively and consider some of the old stand-by sources of early stage funding.
Online equity funding platforms. Many focus on specific industries. I invest in consumer products because of the proven profitability, and because it's a space where I've routinely found visionary entrepreneurs who have tested the product-market fit before they seek funding. Look at other similar companies with early stage funding to figure out what platforms and investors you might be overlooking.
Friends and family. Especially for consumer products, your inner circle can be an important funding source. Don’t just ask for money; treat your nearest and dearest with as much (if not more) respect as you’d treat angels or VCs. Show potential investors—especially parents, siblings, and close friends—your business plan, and sign agreements if they do offer to help bootstrap your company. Again, it’s about respecting the business but preserving longstanding personal ties, too.
If loved ones have the cash, but aren't interested in your venture, ask to know why. Is there something about your plan or your product that gives them pause? Ask open, non-defensive questions and keep yourself accountable in addressing their concerns. Figure out where you can improve, and why your strategies don’t resonate with those who know you best. If you can’t get mom to sign a check, imagine how hard it’ll be to find other funders who will take a similar risk.
Term loans from financial institutions. While not everyone’s favorite funding source, many banks offer intermediate or long-term loans, the former typically to be repaid within only a few years. The latter can stretch to 10 or 20 years, which can seem a bit riskier for a first-time entrepreneur. If you’re comfortable taking on a bank loan, research your options at various local institutions to see who can offer the cash you need with the most generous repayment plan.
Credit cards. It’s the least sexy source of capital, but using credit cards is actually a fairly standard practice many founders turn to. I founded CircleUp in part because I was on a panel a few years ago about securing funding for consumer product companies. Time and again, entrepreneurs said they racked up credit card debt to fund their dream. I knew how commonplace it was, but I also knew there had to be a better way. I don’t actively discourage this practice, but I do think there are more viable options to be explored first.
