Raising money allows a business to obtain capital without taking on debt. You might accept investments (equity financing), where your investors give you money in return for a share of ownership in your business. Crowdfunding is another way to raise funds, it is dependent on other people who want to see your project or business succeed.
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Your investors might be people you know such as friends, relatives, and colleagues. Or they could be venture capitalists, investors who specialize in high-risk, high potential startup companies.
Friends & Family
When borrowing from friends and family, it’s still important to agree in writing on the terms of the loan. This helps you and your investor decide how the money can be repaid but more importantly, it affects whether or not the US Internal Revenue Service (IRS) taxes the money you received. (For example, if you do not repay the money you borrowed, the IRS may classify the loan as a gift and impose a gift tax.)
Venture capital may come from wealthy individuals (called angel investors) or venture capital firms who have rules about how they invest. These kinds of investors contribute to decisions on how to run the company and often mentor the business founder or founders.
View for more links and resources on receiving investments.
Crowdfunding is a method of funding a project or business by raising small amounts of money from a large number of people. It’s standard to apply a set amount and a fixed amount of time in which to reach it. This is a good way of, not only acquiring needed startup funds, but also creating awareness of your new business or product. Crowdfunding can also refer to the funding of a company by selling small amounts of equity to many investors. Below is a sample of the many websites that allow you to create and share a crowdfunding campaign.
NOTE: We are happy to share resources but cannot endorse any of the following for-profit sites.
A San Diego-based company that has quickly risen to become the World’s #1 fundraising site for personal causes and life-events. With a huge pool of funds and supply of donors, the site has raised over $1 Billion for a diverse array of causes.
An alternative online funding platform for creative small businesses focused on such sectors as film, music, art, theater, games, comics, design, and photography.
Another alternative online crowdfunding platform built specifically to meet the needs of growing small businesses.
An online crowdfunding platform that limits the pool of funders and projects to consumer products based companies. Focused on angel investors providing the needed financial support.
An online funding source for small businesses focused on a variety of sectors, such as film, music, art, charity, gaming, and theater.