Adapting to Covid: Accessing Capital
(This post is part of a series of 4 key challenges facing small businesses in the pandemic. To get an introduction to adapting your business during covid-19, check out the directory post, or navigate directly to read about moving online, managing your resources, balancing work + home.)
Right now, a major issue for small businesses and many businesses in general, is access to capital. Struggling to pay your company’s bills? Are there technologies or projects you think would be great for your business but are just too costly to invest in right now?
Capital. It’s the fuel for your business and we’re here to help you figure out how to refuel.
In this section, we’ll introduce you to two channels for accessing cash: crowdfunding and applying for grants. Capital, however, is not just about the cash - it is any and all resources that help your business grow, so we will also introduce you to some channels for recruiting affordable help with your business through volunteers, freelancers and interns.
Let’s get started.
Crowdfunding
First of all: what is crowdfunding?
Crowdfunding is the use of small amounts of capital from a large number of individuals to finance an idea/project/venture/cause or just anything. That’s why there are several different platforms out there all with different audiences, requirements and methods of raising, depending on what you’re raising funds for and what you are willing + able to offer your funders in return.
Crowdfunding platforms are websites that connect people/businesses (like you) with regular people who may be interested in funding your project with as little as a few dollars. This method of fundraising makes use of the easy accessibility of vast networks of people through social media and the built-in audience of crowdfunding websites.
Why might crowdfunding be a good idea for you?
You’re looking for quick funding for a specific project or purpose with clear knowledge of how you’ll be spending the money
You have a strong network to share your campaign with
You have a great idea with a clear market and interest in your project/cause
You are able to offer desirable rewards that aren’t too costly to your business
You’ve exhausted all other options and are willing to put in the time to tell a great story to get the resources you need
This is a great way to raise money relatively quickly and without too much red-tape, however, it won’t work if you don’t advertise your campaign well. This includes developing a strong campaign that speaks to your audience as well as the marketing of the campaign once it’s done, through your social media, blog, email marketing and any other avenues you can think of.
What you need to be prepared to do to be successful:
Tell a great story, which should include a compelling campaign video explaining the product and its benefits
Keep your audience updated with your progress
Invest time in marketing your campaign well
Commit to delivering on your promises
Important to note: honesty + integrity are big here. If you promise to deliver something - whether a reward or just allocating your funds as stated, then you need to follow through. Of course people understand circumstances change; if that’s the case, you should do your best to give back to your supporters, even if that’s just in the form of updating them with a sincere apology and a detailed explanation of the roadblocks you’ve hit. And you never know, maybe your supporters will have ideas for potential solutions or will be invested enough to help you out. Either way, it’s crowdfunding etiquette to respect the time and money your supporters give you, whether or not you are successful with your campaign and project.
If you think this sounds like a good idea for you and your business, continue with this section. If you’re still not sure - check out this resource to understand a little more about the pros and cons of crowdfunding.
Choosing the right crowdfunding platform for you:
If you are interested in crowdfunding, there are a few things you’ll want to consider in order to choose the right platform for you…
What are you willing + able to offer in return for funding? (rewards, equity, a good story/cause)
What do you need the capital for? (to stay afloat vs to invest in growth/innovation)
The first point of consideration (what will you offer in return for funding) will inform what type of crowdfunding platform you choose to go with. There are 4 key types:
Donation-based - people give a campaign money for nothing in return / purely to support your business/project
Rewards-based - donors receive something in return for their donations. The rewards vary by the size of the donation, which incentivizes higher contributions, e.g. a product sample or gift
Debt-based - peer-to-peer (P2P) lending, whereby instead of getting a bank loan, you get a loan from crowdfunding and then repay it by a certain deadline.
Equity-based - contributors receive equity in your business in exchange for cash.
The most common type of crowdfunding is donation and/or rewards based. Some platforms, like Kickstarter, may even give you the option to offer rewards or not and your decision may depend on how easy it will be for you to do so and whether the benefit will justify the cost of the reward.
The second point of consideration (what is the capital for) will inform whether you choose a crowdfunding platform with a focus on innovation or on supporting causes. This is important because you want to choose the platform with the right audience for you, who will be excited about your idea. This will also inform your campaign strategy - i.e. how you tell your story and convince people to give you money. Successful campaigns explain exactly how the fundraiser plans to use the funds and why - so before you start, make sure you know exactly what you are fundraising for. Be clear and have good reasoning so that your audience believes in you.
If you are fundraising in order to stay afloat and continue your business operations, your campaign should be focused on why your business is great and needs to continue serving its customers, why you are the best person to be at the helm and exactly what costs you need to cover in order to continue business as usual. In this case, you might want to consider platforms that work on a donor or debt based scheme.
For this type of campaign, the following platforms are a great place to start:
Kickstarter - big-name platform, rewards + donor based
GoFundMe - social + personal causes, mainly donor-based
Kiva - loans + unlocking capital for the underserved, debt-based
LendingClub - peer-to-peer lending for personal + business, debt-based
If you are fundraising to grow your business in some way, for example through developing a new product or investing in a new technology or embarking on an innovative project, your campaign should be focused on what is so exciting about this project and how your potential funders or customers will benefit from this investment. In this case, you might want to consider platforms that work on a rewards or equity based scheme, if you think the audience you are targeting would be interested in using that particular product (e.g. a reward could be a future discount) or if you believe your investment would increase the value of your business significantly enough for individuals to want to buy into your business (pointing to an equity-based platform).
For this type of campaign, the following platforms are a great place to start:
Kickstarter - big-name platform, rewards + donor based
Indiegogo - creative works, innovation, community projects, rewards +donor
EquityNet - accredited investors matched with screened businesses, equity
Other equity-based platforms here
Of course, these are only a few suggestions, but are well-vetted and popular platforms, so they are a great place to start. If you’d like more details/comparisons of platforms you can check out this quick comparison matrix or this analysis of best options.
When conducting research of your own into crowdfunding platforms, here are some additional things to look out for and compare:
Is it all-or-nothing? - some platforms only allow you to access the capital raised if you hit your goal and if you don’t, all funds are returned to their respective donors.
What are the fees involved? - typically you may be charged a fee for processing payments, which may range from 3%–5% per transaction.
What is the application process? - some platforms require your campaign to be screened before posting which may take some time.
Who is their main built-in audience? - make sure the kind of people your platform attracts are those interested in projects like yours. You can check this by seeing what projects have been most successful on the platform.
Are they popular, are their projects doing well? - check their track record + number of users and user reviews (on both fundraiser and donor sides - you want to know if potential donors trust this platform)
Special features that set it apart - e.g. a platform may offer special guidance for marketing your campaign
So, you know what you’re fundraising for, you know your needs and your capabilities to reward funders and you’ve done your research into different platforms. As always - try not to get too bogged down comparing all the different platforms - know what you need, what you can give and then make an informed decision.
Applying for a Grant
If crowdfunding isn’t for you, or if you think you could use an additional hand or maybe you just want to hedge your bets and do both - you might consider applying for a grant. A grant is a non-repayable fund that’s essentially gifted from an institution, such as a government or corporation.
Although this sounds very appealing - it is not just free money. The application process is often lengthy and rigorous, requiring a lot of time and skill. Furthermore, the intent of most government grants is to fund projects that will benefit specific parts of the population or the community as a whole - so you’ll want to make sure you fit those requirements. There are currently specific programs and grants for covid-19 relief, but those fluctuate so pay attention to dates and deadlines. There are, however, grants and relief programs offered by private companies that may have less rigorous application processes, which we will introduce you to below.
Let’s figure out if applying for a grant is a good idea for you and walk through what you’ll need in order to apply.
Why apply for a grant?
Less risky than taking out a loan because it doesn’t need to be repaid
Small business grants are plentiful + easy to find online
You have the time and resources to create a great application OR
You’ve exhausted all other options and have decided this is the best place to allocate your available time + resources
What you need to be prepared for:
Time consuming application process
Requires a lot of research, planning + organizing
Varying application-review times
Tough competition from other small business applications
Strict eligibility requirements
Strict terms of agreement
Again, these points will generally apply to government grants and are not necessarily characteristic of grants you might apply to from privately-owned companies.
So, is it a good idea? If you have the time and resources and you find a grant whose specific requirements you are able to meet, then this may be a great avenue for you to explore.
Here is a starter list of grant applications:
Shopify grant - offered to clients only - explore
Comprehensive list of government + corporate grants for covid-relief for small businesses - explore
U.S. Small Business Administration covid-relief grants - explore
Expired private relief programs with pages to continue checking for updates -
Human Capital
Now we’ve explored some viable options for how to get funds for your business, let’s turn our attention to another great form of capital: people.
If you are looking for money to fund the manpower of your business, you might want to consider creating an internship program that will allow you to take advantage of “free” labor in exchange for great mentorship and the opportunity to learn.
Right now is a great time to look for interns given the precarious state of the job market and online schooling, leaving a lot of young and intelligent minds just itching to work on meaningful and educational projects. And you never know - you may find an intern who works so well with your business that you’ll end up taking them on full-time.
Alternatively, you might consider hiring a freelancer to work a one-off project if you need an expert for something but can’t afford/don’t require a full-time hire.
Depending on your needs and budget, there are some great places to start looking for human capital.
If you are looking for interns, we suggest you check out the following resources:
Intern from Home - (top recommendation) - started by Ivy League students for startups and small businesses to post internship/other opportunities for students + recent grads ; good for targeting a smaller pool of high quality applicants (best for efficiency)
Handshake - (top recommendation) a larger well-known platform for college students and recent grads looking for jobs + internships (handshake has great relationships with top colleges)
Indeed - an American worldwide employment website for job listings ; good for targeting a much larger pool of applicants with more variation in quality (best if you have the time to sift through applications and if you cannot find anyone from InternfromHome)
If you are looking to hire a freelancer (paid) for a short-term project, check out:
UpWork - an easy-to-use website offering talent from freelancers of all backgrounds (10 million+ people registered and ready to work)
Fiverr - a freelance community designed for employers who have quick, low-cost projects they need help with
For a quick understanding of the difference between the two hiring platforms (pros + cons), check out this resource.
Whether taking on a freelancer or an intern - finding the right help to grow or maintain your business may seem daunting and that’s why these great platforms are working to make the process easier for you.
Accessing Capital Key Takeaways…
Crowdfunding is a great way to raise money quickly, IF you create a clear and creative campaign and advertise it well
Understand the 4 types of crowdfunding and choose the right platform with a relevant audience for what you are raising for
Applying for a grant is a low-risk avenue to explore and requires a lot of time and precision in choosing the right grant and completing your application
Consider hiring freelancers or interns to speed up business projects that don’t require full-time long term hires
We’re done with accessing capital! Woohoo! Hopefully you’ve got a better grasp of steps you can take to propel your business forward.
This post is part of a series of 4 key challenges facing small businesses in the pandemic. To get an introduction to adapting your business during covid-19, check out the directory post, or navigate directly to read about moving online, managing your resources, balancing work + home.
If you think you’d benefit from more guidance or help on any of the issues covered, Launch Local is an organization running solely to help small businesses survive through the effects of the pandemic. Our free services range from website design to market research to digital marketing and SEO. And we would love to help you.
Sign up here or reach out to us via email at hello@launchlocal.org and we’ll help you on your way.
Still deciding if Launch Local is right for you? Learn more about our services here or read about how we helped a local apparel store in North Carolina and their feedback.
