Crowdfunding is a collaborative funding model that lets you collect small contributions from many individuals (the crowd). With donation-based crowdfunding, represented by well-known brands like
Kickstarter and
Indiegogo, you collect money from individuals and offer them products, or one-time rewards, as perks for donating. With investment crowdfunding, businesses sell ownership stakes to investors who then get the potential for financial returns if a business is successful.
Microloan lenders are organizations that lend out small amounts of money, typically in the range of $5,000 to $50,000, to entrepreneurs who can’t secure working capital from more traditional financial institutions or credit cards.
Angel investors provide financing to small companies in exchange for an equity stake in the firm. Money received is an investment, not a loan, but angels will want a clear path to profits, either through a public offering or acquisition at some point down the road. As stakeholders in your company, angels are motivated to help you succeed, and may offer mentoring and management guidance to help achieve goals.
Peer-to-peer lending is the practice of packaging small amounts of money – from $25 on up – from many different individual lenders to provide directly to a borrower in the form of an unsecured personal loan. Over the past few years, peer-to-peer lending to small businesses has grown. According to the
SBA, Peer-to-Peer Lending platforms issued $5.5 billion in loans in 2014. Continued growth is expected with the market expected to hit $150 billion or more by 2025.
Start-up incubators, many of which focus on the technology sector, support the development and growth of entrepreneurial companies. They offer resources that include physical office space and shared services, expert mentoring, consulting services, legal counsel, and seed money – anywhere from $18,000 to $150,000. Plus, you get networking access to investors and experts who can provide valuable guidance after you leave the incubation program. In exchange, the incubators may take a small equity stake in your company.
