His name is Kevin Plank. And he was born on August 13, 1972.
Kevin was a football player at the University of Maryland. But he was no ordinary football player. In fact, he proclaimed himself to be the “sweatiest guy on the football field.”
Being the “sweatiest guy” wasn’t a joke to Kevin. He became sick and tired of his cotton t-shirt’s inability to keep him dry and comfortable during games and practices. So he decided to do something about it. Specifically, he started searching for a material that would wick the sweat from his body, making him dryer, lighter and faster.
Kevin succeeded in finding this material, creating products from it, and building a company out of his products. The company, called Under Armour, is now a public company. And when Under Armour went public in November 2005, the company raised $112.5 Million to fuel its growth.
Importantly, Kevin knew that nobody was going to give him $112.5 million in funding to start his company. Rather, he knew he had to raise smaller amounts at first to achieve some success. And with success, he would be able to raise more and more dollars.
So, Plank, while still a college student, started a small business that sold roses for Valentine’s Day. While he only made a few thousand dollars from that business, he used that money to initially start Under Armour.
And when he soon burned through those dollars, he got $40,000 from credit cards (he got five credit cards in order to do this) to fund further growth.
And as the company grew, Plank raised more and more money from various funding sources, eventually reaching the promised land of entrepreneurship: going public and raising over $100 million.
Kevin Plank’s story is critical to entrepreneurs that need to raise money. Among other things, it should teach you that you can’t simply post your idea or business plan online and expect investors to throw money at you. That’s just not how funding works.
Rather, you need to figure out the right forms of funding for you based on your stage of development. The latter part (based on your stage of development) is key. Let me explain. While I’ve identified 41 sources of funding to which entrepreneurs have access, many sources are tied to how far your venture has progressed. For example, if all you have is an idea (and no prototype or beta customers), then you are too early for the vast majority of venture capital firms. In such a case, you need to raise other types of funding first, achieve certain milestones, and then contact venture capitalists.
In addition to understanding which of the 41 sources of funding are right for you, you need to determine what you’re willing to give up in return for the funding.
When raising equity funding, you must give up equity or shares in your business. So, if and when your company gets sold or goes public, some of the proceeds will go to your investors and not you.
When raising debt funding, you’re agreeing to make future payments of both interest and principle on the loan. And you may need to put up personal items as collateral.
And finally, with alternative and creative funding, which is often a great option for early stage companies, you may not have to give up either equity or agree to future debt payments. But you still must typically give up something.
For example, with vendor financing, you’ll give up your right to use multiple vendors (in this type of financing, the vendor will fund your business based on your agreement to use them exclusively for a certain time period). Or with grant funding, you’ll give up some of your growth flexibility (since you’ll only get fully paid on the grant if you achieve the goals set forth in the grant proposal).
We’ve all heard the expression, “it’s not what you know, it’s who you know.” This is not necessarily true when raising money. Sure, it helps if you have a rich uncle who’s willing to write you a check. But such “friends and family” funding is but a small portion of the funding options available to you as an entrepreneur.
Rather, it’s what you know; your knowledge of the types of funding out there and your creativity and perseverance in accessing them that really matter.
So, start by figuring out what company goals you would like to accomplish in the next 12 months. Then, determine how much money you will need over this period to get there. And finally, decide what you’re willing to give up in return for this amount of funding.
Once you raise that initial funding and achieve those goals, more and bigger funding options will appear. And, in many cases, upon your initial success, funding sources will start to contact you. And that’s the exact position you want to be in — having funding sources competing to fund you, and not you competing with millions of other entrepreneurs for funding.
Suggested Resource: Want funding for your business? Then check out our Truth About Funding program to learn how you can access the 41 sources of funding available to entrepreneurs like you. Click here to learn more.