Where to get start-up Money

Here are three types of investors you may want to pitch for start-up money.


1. Mom and Dad – Because they've known you since you were trying out for Little League or the high school musical, Mom and Dad are typically an easier sell than a professional investor whose goal is to make 10 times his money in five years. Friends and relatives tend to know less about business, ask fewer tough questions and be more concerned about helping you succeed than achieving above-market returns. On the other hand, if your business goes bust, you might be off the holiday gift list for good.


2. Your Old Boss – Next to Mom and Dad, nobody knows you longer or believes in you more than your former boss and mentor. He or she took a chance and hired you right out of school, nurtured that potential that not everybody else saw, and now feels justifiably proud that you're spreading your wings to fly to the next level. Just remember that, when you take your boss's money, you may be taking on a not-so-silent partner. And, if your career as an entrepreneur doesn't take off, don't assume that you'll get your old job back.


3. Your Supplier – Nobody's got more of a vested interest in your success than the company that makes or distributes the product you're selling. After all, the more sales you make, the more orders you place with your supplier's factory. That's why startup entrepreneurs with a blockbuster product or invention often partner with their manufacturer to get their product off the ground. But that marriage of convenience often comes with strings attached and, if you ever decide to part ways, be prepared for a messy and expensive "divorce" and a potential competitor.

The reality is that even raising money from people you know can be a long, painful and ego-draining process. That's why I advise clients to prepare themselves to knock on hundreds of doors before even one of them opens. One of our clients decided to make a game of it, challenging herself to collect as many "no's" as possible. Within several months, she had overcome her fear of rejection and raised $650,000, having never raised $1 before in her life. You'll never know until you start knocking.

Credit to Wall Street Journal Small Business