Editor’s note: Kristopher B. Jones is the founder and CEO of KBJ Capital, a Pennsylvania-based angel investment fund with 15 portfolio companies. He sold his previous digital marketing and technology company Pepperjam to eBay in 2009.
For any startup, finding appropriate capital can be a matter of business survival. Nowadays, everyone is aflutter about the sexiest capital-raising tool on the block: crowdfunding. According to a recent Entrepreneur article, crowdfunding raises a whopping $2 million per day, an equivalent of $87,000 per hour.
Slap up a video, write a description of your project, share your dreams on social media and simply sit back and watch while funding rolls magically your way. The success stories boggle the mind. But despite all the media hype, the reality of crowdfunding for most small business is far different. The dirty little secret is that for every crowdfunding success story, there are thousands of flops; well-intentioned business owners who diligently set up their Kickstarter page but don’t receive a dime.
But that isn’t reason to give up. The great news is that crowdfunding is definitely not the only kid in town. In fact, I think you might be surprised at all the capital-raising gems literally located in your own backyard.
Here are some of my favorites:
The government is an often ignored and misunderstood place to find capital. From low-interest (as low as 0 percent!) loans to outright grants, the government has programs at all levels to support startups and small businesses. Here are some tips to help you in your hunt:
- Look local. While state or federal funding opportunities are often thin, almost all cities, townships and counties have some capital available.
- Seek tax credits. If your business will create jobs or you are in specific industries (like technology) you very well may be eligible for tax credits which you can actually resell if your business doesn’t need it. One of my startups (ReferLocal.com) received a $100,000 tax credit in 2014 from the state of Pennsylvania. Since we didn’t need the tax credit, we sold it on the open market for 92 cents to the dollar, giving us a welcome capital infusion.
- Show how you will contribute. Make sure to demonstrate how your business will encourage job creation or economic development in the region; this will greatly improve your chances of getting money.
To learn more, set up a meeting with your town’s government division that specializes in community and economic development. Also check out the Small Business Administration for available loans and grants.
Small Business Development Centers
SBDCs are my capital-raising favorite. Often linked to a local college or university, SBDCs exist in most communities and are an excellent resource if you’re looking for hard-to-find grants. The’yre also an excellent place to receive high-quality and free business counseling.
Chambers of Commerce
The Chamber of Commerce has always been at the center of any local business community. To profit from a chamber, you need to be an active member. The reason is that if you are active (attending all the events and contributing to the community) the chamber will prioritize your business when they allocate valuable resources like low-interest loans and grants.
Most private foundations provide grants for nonprofit activities and some social causes. Some will also offer competitive grants to small business owners — particularly women and minorities. A great example is the Amber Grant for Women in Business, which gives money to women entrepreneurs trying to start a home-based or online business.
Business Plan Competitions
Every year hundreds of business plan competitions are conducted throughout the United States to provide cash and/or in-kind services for startups. For example, in Wilkes-Barre, Penn., there is an annual Great Valley Business Plan Competition that awards as much as $25,000 in cash and up to $100,000 in in-kind services.
Raising capital can be both complex and intimidating. It can feel like a long and winding road but if you stick it out, you will succeed at getting money from the most unlikely of places. Try viewing it as a game. Have fun with it. Treat it like a treasure hunt and who knows what you will find.