The Startup Playbook, 2nd Edition

Chapter 18Sources of Capital

The majority of companies that get outside funding get their capital from a combination of angel (people who invest for themselves) and institutional (people who invest for others) investors. But, as an investor, I (Will) run across companies that have to find innovative funding mechanisms from time to time. Deciding whether to engage with these companies can be a difficult call. Obviously, not being able to get interest from angels and institutions is a red flag, after all. But sometimes, unconventional funding mechanisms are ideal for a new venture.

First, you need capital. If you can't get it from angels or VCs, you simply have to find another way to get it. Now, I wouldn't recommend you sell your soul for money, or for any other reason, but it might turn out that getting your capital from other channels is the only way you can get it. If that's the case, why wouldn't you try something a bit different? It's not only that alternate means might be your only source of funding, but they might just be faster or easier for you than beating on the standard methods for a long time.

Another thing to consider is that going a different route might help you in marketing and overall visibility. If you can kill two birds with one stone, why not go for it?

There are a handful of investments I've made recently that successfully found alternate funding methods. Some were standalone—the unconventional method was the only source of funding—and some were in combination ...