As a woman-led business with direct-to-consumer products, your biggest struggle may well be how to get funding for new products you want to launch. If you’re male and especially if you’re in the tech or crypto space, there seems to be plenty of support. Loans, venture capital and angel investors favour men.
In fact, in 2021 women-led businesses attracted just 26% of all the funding invested in Australia, according to SmartCompany. And when we specifically look at funding deals, Techboard’s Australian startup funding report for 2021 showed 8% backed startups with all-women founding teams. A 12% drop from 2020.
What happens when you’re female and you have an innovative product idea for your direct-to-consumer brand that doesn’t fit those criteria? Let’s explore what to do when you have an idea for a product, but no money.
Here are 6 ways you can secure funding for new products
I want to outline 6 creative ways you can get your product out into the world, without having to rely on traditional sources – like loans, venture capital and angel investors. You see, that’s one of our strengths as female entrepreneurs – the ability to get creative to make things happen. Whether it’s needing finance to develop the technology around your business or simply needing to launch.
You may even be able to take one of the finance ideas below and expand upon it further.
1. Bootstrap to get your idea off the ground
Bootstrapping is when you use your own funds. It tends to work best for ultra-low complexity, non-technical products. If you fit that criteria, then it can have some wonderful benefits, like ensuring you focus more on getting a product that customers want, rather than pleasing the criteria of a funding body.
It can be a more challenging road, but that also means a more rewarding one too.
Here are some suggestions for success when bootstrapping:
- Team up with someone who has skills in areas you don’t
- Work a day job (or as some like to creatively call it, their “investor client”). This pays for your personal costs and possibly some of your start up costs. You will have to sacrifice time spent on the business though
- Continually educate yourself where your skills are lacking to avoid having to outsource or hire others
- Get creative with your marketing by looking for free platforms and tools to promote your product (even before it’s launched if need be)
- Ensure you have a strong message (even the biggest advertising and PR budgets in the world can’t help a brand without a good message and value proposition to share)
- Break your product idea into different launch stages or narrow your scope to start with to avoid the need for large amounts of upfront capital
Granted, bootstrapping isn’t for everyone. Sometimes it’s not possible in your situation or you may have a product that can’t come to fruition without funding. The pathway to profit can also sometimes be much slower than if you had an investor.
However, the creative control and ability to keep 100% of the profit can often far outweigh the pains during the early stages.
2. Partner up with someone else
You don’t have to go it alone in business. There are some creative ways to look at partnerships in business, without feeling you’re giving away the farm.
Your options might include:
- Having a business partner or co-founder who has the skills you lack, as mentioned in the bootstrapping section. This person may also be willing to put in personal funds as you move through the different stages of your business
- Asking your supplier to come on by either giving you credit until you’re profitable or advancing the finance and taking a share in the equity.
- Family or friends may want to come on as silent investors. This is a popular option for many young entrepreneurs starting out.
What other partners do you have in business? Depending on the relationship, you might find these are the people who most believe in your idea and are willing to help with funding for new products you have.
3. Crowdfunding for products that are profitable
Crowdfunding isn’t a new concept, with companies like Kickstarter and Indiegogo having been around for a while now to help with new product investment.
On the female front, there’s even ones specifically for women in business, like Lift Women. On its website, it states that it’s “Australia’s first women-focused go-to funding marketplace” and that it exists “to connect, inspire and empower women to start and scale their businesses, and live a life to its fullest potential”.
When using crowd funding for new products, there are different options:
Donation or reward-based
You can ask people to donate to your product in exchange for non-monetary rewards. So this could mean pre-selling your product before it’s created. Or they could receive an intangible reward.
Those who invest in the product don’t get equity in the company but are an early adopter of the product. Of course, you need to be upfront and honest with your customers if you’re promising to give the product in return for their donation, so they know the timeline for creation of the product. Be realistic here.
An equity-based crowdfunding model is where each investor is given a stake in the company proportional to their investment. You do need to ensure you adhere to certain criteria, depending on how many investors and how much is invested.
With both options, you can do them publicly, or invite selected people in to make it more private. The benefits of the private approach are you can be selective about who your first customers or investors are, get feedback throughout the process, and even keep a tighter lid on what you’re creating to avoid snooping competitors.
This may require you to have a larger network to tap into, depending on the price point of your product and your needs to fund product development. But it could help get you to phase one of your product before going public.
The benefits of crowdsourced funding have long been the ability to gauge interest in your product, while also building the funds needed to get it built and launched. And, with the pre-sell option, it also means not having to relinquish equity shares in the future.
However, you’ll need to be able to get the funding page out to an audience interested in your product in the first place. And the other downside is the time it takes to create and manage a funding campaign.
4. Revenue-based funding
Platforms like Clearco (previously known as Clearbanc) and Outfund are known as revenue-based financial bodies. Similar to crowdfunding, these are aimed at business owners who don’t want to give up a stake in their business when looking for funding for new products.
It’s a new concept where companies, like the above two, will lend a certain amount of money, and you pay a multiple of that amount back out of revenue. This means you don’t have to worry about monthly debt payments when you’re in a low period. You also know how much you have to pay back, without any nasty surprises.
However, this financial model won’t suit all businesses and will be dependent on your business model and financial plan.
5. Get a business grant as funding for new products
There are so many grants available now and some specifically tailored to women-led businesses on a state, country and global level. It just requires a bit of work to find the right ones.
The benefits include not being expected to pay it back like a traditional loan and not having someone own part of your assets later on like investment capital. However, you do need to ensure you know what the conditions of the grants are so you go in with your eyes wide open. There may be conditions tied to the grant that you’re not willing to take on.
Some things to consider when getting business grants to raise money for new product ideas:
- Seek out all government and non-government grants within your industry or niche and compare to see which suits you best
- If available, take a look at grants that focus on women in business
- Read the fine print – this means checking carefully whether you’re eligible for the grant first and then secondly, seeing what the parameters of the grant are
- Get clear on what you specifically need the money for and outline that within your business plan
- If needed, invest in getting help to put your application together to ensure a higher chance of success
You will need to be mindful of timing with grants – that is, when they become available, the window of time you have to apply for them, and how long the approval process is. If it’s a long, drawn out process, you may miss opportunities within your business for growth. This means it may not be ideal for all businesses.
6. Join Incubators and Accelerators
Incubators (or early stage businesses) and accelerators (for growth stage businesses) can provide some capital, but also come with mentoring and sometimes co-working space. There are also a lot of options available, meaning you can often find one that suits what you’re trying to achieve.
However, incubators can also expect an equity stake in the business. You’ll need to know how to negotiate the right deal for you. That being said, they can open doors for your business by connecting you to the right people and providing advice in your speciality area. This can sometimes be worth giving up a little equity for.
The downsides can be that competition for places is often high. Like going for grants, the wait time to get into an incubator may not suit your timeline.
So there you have it, six options for you to secure funding for new products you want to launch – whether your first product or subsequent products. There’s now no reason for lack of funding to be an excuse for not starting or expanding a business.
If you’re unsure which financial option is going to be best for your business and your product idea, then reach out. I’d love to help you select the model that will best achieve the business goals you’ve set and ensure you’re fully aware of the benefits and disadvantages of each based on your personal situation.
If you’re looking for other ways to stay ahead of the competition, learn how to launch and grow a successful brand with a competitive advantage so customers ONLY want to buy from YOU. Download the free 5 Ways To Stay Ahead of Your Competition guide.
Note: This blog post is not intended to be used as financial advice. Seek the guidance of a financial expert before making a decision.