FJD1.com

Venture capital
Don't think you have to want at least a million dollars in order to be interesting to venture capital groups. "One-third of the funds being raised now are for $50K or less," says John Taylor, research director at the National Venture Capital Association (NVCA) based in Arlington, VA. NVCA represents over 360 venture capital and private equity firms, amounting to approximately 85% of all venture capital invested in the United States.

"There are VCs that are very willing to talk to [those seeking small amounts]. Others say even if you're a year away, we'll give a quick look."

Angel investors
Just like venture capital, many individual investors are flush with gains from equity markets. They're eager to plow earnings back in and are willing to wait a little longer than VCs for the typical 25-50% return, hence their "angelic" status. They got their divine name from early Broadway days when an investor would rescue a flailing production, often with no profit when a show closed.

Some figures estimate that there are as many as 250,000 angels investing up to $25-30 billion a year in the U.S. According to the NCVA, there are no statistics on this type of investment, but they say it could be double the venture capital market.

"The difference between angels and venture capital is huge -- it's like the difference between going to your Uncle Harry for $100 thousand or to your bank for $10 million," says John Burke of ABS Ventures from Baltimore, MD, a venture group that typically invests $3 to 15 million in IT or healthcare startups. Though he admits that you can't group all angels together, "99% of the time, the typical route of funding a startup is friends and family, angels, and then institutions [such as VC]." Only when things go awry, does the order go backwards. How to get started with an angel? Keep reading.

Incubators
Don't think that your company has to be ultra-sexy or frenetically ambitious to get into a business incubator. Only 8% of incubators are for-profit. These homes for potential golden eggs exist in almost every state and have a multitude of sponsorship arrangements, often with educational institutions, or with local governments whose main goal is to create new jobs in their communities.

Twenty years ago, there were only 10 or 15 incubators nationwide. Last year, there were 585, and there are more on the way, offering startups a variety of help, such as discounted rent in exchange for shares in the hatchling company, access to government funding and resources, as well as private sector expertise and financing (namely, angels).

Three years ago, Ed Palmer, CEO of SolarAttic, moved from his garage into the Elk River Business Center, an incubator sponsored by Genesis, which houses a myriad of other baby businesses in Minneapolis, MN. He plans on moving out in a year due to lack of room and docks required for his inventory at the center.

"Otherwise, I would stay as long as I could," he says. "They took stock [in exchange] for 80% of rent, which dramatically helped my cash flow." The synergy of working with another business at the incubator improved his own technology for converting the heat in attics to energy. Most of all, moving into the incubator helped his credibility to attract financing.

"It takes you out of the garage. Many people have come to see our facilities, and it's a lot different driving up to this building than to a house," Palmer adds.

Trusted advisors
Asking your professional services people, such as lawyers, accountants, and consultants, about financing is a great way to get the right introductions to private investors and VC as well. If your idea is viable enough, they might even invest themselves.

"When we like a client, we make sure that cash is not an issue; we try to take compensation off the table," says John Hilgenberg of The Eager Street Group, a consulting company in Baltimore, MD. Most of the companies they mentor are in the pre-venture stage.

They aren't "money-finders" he says, but they know the people who are. "Don't be afraid of your investors," Hilgenberg points out. "It's surprising how many companies are afraid of losing control. They approach the process in a semi-adversarial way and investors can sense that." That's the point at which many investors walk out. "The company which is not willing to say everything, the positive and the negative, is not going to be perceived as trustworthy."

Mine the Web
Don't be incomplete when filling out extensive forms at Web sites geared to link up money with opportunity. You've got to give an impression of confidence and thoroughness in all written communication since that's the beginning of this kind of relationship. When a site also requires you to post your business plan, be proud of it. Make sure everything's perfect.

Floating and factoring
Don't overlook the strength of credit cards, says economist and investment newsletter author Mark Skousen. "They've become a viable source of funding for small businesses," he says. The trick, he says, is to not apply for more cards when you are maxed out on the others. Instead, apply for several at one time. "Although it's risky," he admits, "you can use advances from one credit card to pay the minimum on other cards."

Skousen used the floating concept when he started his own publishing business 20 years ago. He was able to place ads for his book and pay for them a month or two later when revenue was coming in, he says. His latest publication is The New Scrooge Investing.

A cousin to floating is factoring: selling your accounts receivable invoices in advance of payment. There are many companies that will buy your future earnings now, just when you need the money most. There are even brokers and referral agents out there to help you find the right buyer. You can find them on the Web, such as AMJ Factoring, or in the newspaper. Your best chances for selling accounts receivable are with invoices to the government, or a customer who has a track record of paying.

Bartering
One way to solve the money crisis is to not pay cash for anything, says Alan Zimmelman, president of the National Association of Trade Exchanges. Even when you do have cash, it still makes sense to barter.

Years ago, with little or no experience in baking, he started a cookie business in Palm Springs, "before there was Mrs. Fields or Amos." He figured that since the next closest place that people could buy fresh cookies was at a mall, three miles away, he could be successful. Trouble was, he didn't have the money to advertise. So, like a good neighbor, he took cookies in to the radio station, whose airtime also goes stale if it doesn't sell. And, for the first time in his business life, he made a barter.

Soon Zimmelman's cookies were all over the airwaves, making him look like the most successful company in town, he says. "People stopped in just out of curiosity." You say you've never heard of Zimmelman's Cookies? Little wonder: Mr Zimmelman became so enamored of bartering that he sold his successful cookie business, and eventually bought a bartering company.

Bartering has become quite sophisticated since those first transactions involving livestock and bushels aeons ago. With programs that allow you to convert your goods or time into points that you "spend" in trading networks, you can barter your way to almost anything and save up to 80% on retail prices. That's a lot better than cash, especially when you don't have it. You do, however, have to pay taxes on the value of barters.

Sponsorships and partnerships
Don't think you're too little to be of interest to big shots with deep pockets. Sponsorship is a $22 billion dollar industry and growing as the next medium of choice in advertising. The best way to get your foot in the door at a corporation for sponsorship is to plan an industry meeting or event that they "help" pay for.

Dave Starr, VP of business operations at Vcapital.com, an ambitious one-year-old referral service for entrepreneurs and venture capitalists, agrees: "It's good for both sides. For fledgling companies, alliances and partnerships are the best ways to get a leg up. There are many benefits other than cash that they can bring."

Arthur Andersen is one of Vcapital.com's sponsors, contributing content and expertise to its Web resource center. "Though they are not an equity holder, they provide us with credibility and value." Starr points out that when making sponsorship deals, "it's very important to understand what [the potential sponsor's] motivations are. Make sure you know what their long term goals are."

Final tips
Promote all you've got, whether it be a minority or woman president, or the social cause your spouse insisted be a part of your Web site. Many funding sources, especially the government, incubators, and angels, focus on these set-apart qualities, which when added to a great idea and business plan, may nudge you above others clamoring for attention and funds.

And, above all, make sure to get more money than you think you need. You don't want to be in a cash-strapped position when you set out on your second round of financing. Not only will it lessen your value, you won't be able to shop for the best terms possible, which is what financing is all about.