How to Seek and Secure Funding for Your New Product Development
You’ve got a product idea that you’re confident can be a success. You’ve conducted extensive market research, assembled a team of qualified collaborators, and maybe even established proof of concept. But now, you’re faced with what might be your steepest challenge of all: securing funding to successfully develop and launch your product!
At Pivot International, we’ve helped clients from all over the world design, develop, and manufacture award-winning products. With expertise that spans fourteen industries and 320,000 square feet of manufacturing capability across three continents, we know what it takes to bring a product from conception to distribution. With nearly fifty years of experience, we’ve seen clients successfully secure funding using an array of strategies.
Choosing the right product funding strategy often depends on the amount of capital you’re seeking:
- We’ll explore sources that tend to be most effective for securing capital in the five-figure range.
- We’ll move on to an option that can be an excellent choice for securing capital in the six-figure range.
- We’ll identify sources that make the most sense when seeking seven-figure funding for medical, industrial, or highly complex consumer products.
Five-Figure Range — Bootstrapping
Funding for the five-figure range is most often obtained through “bootstrapping,” micro-loans, government- or non-profit grants, or community organizations. Bootstrapping is just another word for self-funding. It means drawing from your savings, using your credit card, taking out a small business loan, a home equity loan, or line of credit. Self-funding often also means borrowing from friends and family.
When seeking small amounts of capital ($25 to $5,000), many micro-loan organizations are designed specifically to assist start-ups, including those geared toward minority or women-owned businesses. And by going to the Small Business Administration‘s website and using the Loans and Grants search tool, you can determine whether you qualify for a grant or a guaranteed loan to help you launch your product.
Six-Figure Range — Crowdsourcing
While there are certainly other sourcing strategies appropriate for this range, crowdsourcing can be one of the most accessible and powerful. Crowdsourcing platforms like Kickstarter, IndieGoGo, and GoFundMe have been successfully used to fund many highly profitable products. For instance, funding for the Oculus virtual reality headset purchased by Facebook for $2 billion was initially obtained via Kickstarter.
Crowdsourcing lets you cash in on the power of crowds, recruiting small amounts of capital from hundreds, if not thousands, of individuals. The nice thing about using crowdsourcing for product funding is you don’t have to offer your supporters future equity shares. Instead, you can offer perks to individuals whose contributions exceed a specified threshold.
Seven-Figure Range — Professional Investors
When you aim to “go big, or go home,” you will need to call in the big guns: professional investors (angels and venture capitalists). Because you’re playing a higher stakes game than companies with more modest goals, you’ll need a business model that’s absolutely bulletproof. (Which means you’ll first need to establish proof of concept.)
Because you’re dealing with professional investors — individuals who invest for a living — they will expect to be paid accordingly. (When your product achieves the success you know it’s destined for, you’ll be paying your investor via a share in equity and profits.) When pitching to investors, it’s crucial to understand you’re not there to make a case for your product. To avoid this costly mistake, you need to know how to think from their perspective.
To identify angel investors, check out Angel Capital Association, which has more than 330 angel investor groups across the United States. AngelList is another great website that helps connect entrepreneurs with qualified investors.
Once you secure funding, then you’ll be able to move forward with making your product vision a winning reality. If you’d like to learn more about how we can work with your company to take your product from conception to successful launch, contact us today for a free consultation.