Small business loans aren't your only funding options. Explore the multitude of funding alternatives for your next start-up.
For several years now, walking into a bank looking for a small business loan has been like walking into the desert looking for a drink of water: You might find one, but it's likely going to be a long walk before you get there.
"We knew that," said Aidan Augustin, whose start-up company, Feathr, is going on its third year of operation without a dime of help from a bank. "We knew banks would want us to put up collateral and do a lot of things we weren't going to be comfortable doing, so we didn't even bother asking them for help." Instead, Augustin and his college roommate and co-founder, Neal Ormsbe, combined some old-school business funding techniques (tap friends, family and personal savings) with some new-school innovations (enter contests, do crowd-funding, seek grants) to get Feathr crawling and now, finally, walking on its own. "We sort of hopped, skipped and jumped our way around from one funding source to another to get us going," Augustin said. "Then we started generating some revenue in May, and revenues have kept building up to the point where now we're self-sustaining."
Feathr is a smartphone application designed to improve the experience for people attending conferences. It allows attendees to use their iPhone or Android devices to network with speakers, sponsors, exhibitors and fellow attendees during and after the conference.
"The most valuable thing you get from attending a conference is the connections you make," Augustin said. "Our application makes it easy." Augustin came up with the idea during his junior year at the University of Florida. He and Ormsbe, both engineering majors at UF, quit school to devote full-time efforts to building the application and the company's website, feather.co.
The one hitch in the plan? Finding someone to pick up the living expenses for 20-year-old college dropouts. Neither Augustin nor Ormsbe was old enough for traditional fall-back money sources like IRAs, 401(k)s or annuities, so they started the funding process with the friendliest audience available: family and friends."I had some money left over from an internship I did that helped us get started," Augustin said. "Then our families decided they would send us the money for room and board as though we were still in college, but there was going to be a time limit on that."
Augustine and Ormsbe tapped into a couple of advisers from the Florida Innovation Hub incubator, who thought the idea had promise. They provided a few months of funding that took the financial pressure off the families. Next up was a visit to the crowd-funding site Indiegogo, where Feathr found enough followers to supply $21,000. A few months later, Augustin and Ormsbe won a lottery for free tickets to the "Launch Festival," a conference in California for software start-up companies. While at the conference, they entered the "Largest Hack-A-Thon In History" contest sponsored by Barracuda Networks. They beat 130 teams for the top prize: $25,000.
"More funding," Augustin said. "Plus, we made a lot of contacts at the conference that really helped us move our company forward." It also led to front-page story in the Orlando Sentinel that "created a lot of buzz about our company," Augustin said. "It let people know we were still around and that we were doing some good things." The big funding hit came early this year when members from TiE (The Indus Entrepreneurs), a nonprofit club in Tampa that helps promote entrepreneurs, awarded Feathr $150,000. Feathr added help for customer support and sales, boosting its workforce to nine employees. It also gave Augustin and Ormsbe a chance to settle down and do some long-range planning. At the moment, that strategy doesn't include visiting any banks.
"After jumping from source to source, we've got at least one year of guaranteed life, which gives us a lot of flexibility," Augustin said. "We are going to go for another, larger round of funding in 2014, but I don't know if we'll go to the banks. We're self-sustaining now, and that feels pretty good."
(Image: renjith krishnan via freedigitalphotos.net)