Finding funding for your start can be the easiest in your own community. Your community may be in terms of relationships, geography, interest area or affiliation.
Communityfunded companies are not a widely accepted term. However, there is an increasing number of ways that businesses are financed economically within a society. Some are very traditional, for example hills that started during the 19th century and new ones are growing all the time. An example is crowdfunding, which is recently part of the social networking phenomenon.
Driving power comes from two directions. The first is dissatisfaction with Wall Street and all the big bank represents. The other is the growing local movement, the natural offspring of the environment.
Keeping funding in your own society has advantages and disadvantages. Some of the pluses are that you know that those who provide money and your business are visible to them. Banks have a very bureaucratic approach and lending decisions must go up the line to a corporate office elsewhere. With community funding, your access to lenders is simple and in most cases facetoface. Minuses include the opposite of this coin: you will have nowhere to hide. I always tell business lenders to overcommunicate with their banks. If you borrow from those you know, its time to communicate with them likely to take much of your energy and feelings.
Family and friends some also say fools
For many generations, startups have been looking for family and friends for finance, whether capital or loan money. This is often extended to customers and suppliers. According to the Angel Capital Education Foundation, $ 60 billion annually launches through friends and family. Thus, it is probably the largest single source of Series A funding available.
There are some strong approaches to this route, because emotions and relationships are at the forefront. You will focus on getting the money, but you must also know their point of view. Treat them as if they were a company and give them good reason to help. Be clear about how you will repay them and use a banknote to make it legal.
Have a backup plan. If the loan from a member of the family has to be canceled for reasons that the lender has lost a job, you must be able to pay back or risk family fever. Ask yourself if it is the right course in the first place and be careful that it is difficult to price and structure the right deal for both parties. Think about how things will happen if your start gets up in your stomach. To control disadvantage risks is often the key to a successful start.
Community support agriculture CSA is now a widespread way of providing smallscale financial support for farmers. Generally, members of a society purchase shares in agricultural production before the season and receive delivery when and when the specific crops or meat becomes available. The process has now spread to other sectors of the economy, mainly in food and agriculture. There are examples of seafood Port Clyde, ME and restaurants where patrons invest and may be repaid in meals and other benefits over time.
This tends to be a very effective, but somewhat risky way of getting money for the investor. I lost several hundred dollars, supported a small bookstore in my city, where my uptake money would have been paid back in books every month with a small amount of interest. The business model was not sufficiently prepared and the start was poorly managed and resulted in a failure.
Interestingly, about two years later in the space next, another communityfunded activity has opened a restaurant. Not only did these founders ship shares to local followers, but they themselves buy products from local CSA farms. There are many other ways in addition to the CSA model for prefinancing product sales through subscription or shares.
They are much more widespread than you can imagine, both locally and nationally. There are almost 30,000 of them in the United States. I used to serve on the board of Brattleboro Food Coop, a store in two stores in my local Vermont city. We had reached capacity in our main store with a turnover of $ 16 million and decided to build a brand new store at a cost of several million. Coop members in the site gave over $ 1 million in 3 and 5year loans as part of the shareholders to back the bank and other funding. In addition, another local coop has collaborated in the building Coop Power by providing the sun roof.