The Best Revenge Is Your Paper: How to Finance a Startup
by Brianna Kilcullen
Money can hold a lot of emotional baggage unrelated to its actual value. I know it did for me— and sometimes it still does. Money can mean power, it can mean inequality, it can mean pain. In light of recent events bringing the world’s attention to the United States’ systemic racism, I believe that all women should have equal opportunity to pave the way in creating the businesses of tomorrow. As a small business owner myself, I find it more important now than ever to share some of the things I’ve learned about funding a startup along the way.
In the words of Lauryn Hill:
“We need highly capable people who can help rebalance an economic paradigm that was born from a system of free labor and exploitation, and only works as long as certain people are excluded from the full promise of freedom. We have the potential to create new educational paradigms and community educational paradigms and community economic support systems that help remove people from the conditions of desperation that lead to violence and looting. Capitalism should be challenged to evolve.”
The opportunity to create financial freedom was right up there as one of the top incentives for me to start my own business—in addition to making a brand and product that’s better for all people and the planet. As a single woman in her early 30s, I have adamantly held onto the concept of making my own money for my dear life, because I fear falling into relationships where I become dependent and no longer choose to be in that relationship but need it to survive.
Women make 21% - 45% less than white men in the corporate world. In addition to wanting financial freedom so it didn’t dictate my love life, I also wanted financial freedom so that I didn’t have to work for someone else and have my personal values compromised on a daily basis.
Thank you, next.
Not only are the odds stacked against women in receiving equal pay in the workforce, but they increase once you decide to set out on your own. In 2018, female founders received 2.2% of all venture capital. That’s insane. You know what else is insane? Women make up almost 80% of the consumer spending in the United States, and yet, simultaneously make up a little more than 5% of the same executive leadership that’s telling women what they should be buying.
Looking back, I’m grateful that I wasn’t aware of how big these discrepancies were when I launched my business, because I don’t know if I would have had the courage to take the leap. But I want to let you know that you do, and that you can learn from my mistakes.
So, let’s get started.
Once you’ve created a badass product or service, I recommend using a platform like LivePlan to create your business plan and calculate your financial projections to determine your required capital. Using an online business planning tool also allows you to export data into a powerpoint, which you can later use for your pitch deck.
Once you’ve determined your capital needs, it’s time to figure out the right type of capital to get it up and running: debt or equity. Below, you’ll find options—as if you were starting your business from the ground-up—listed in chronological order:
DEBT CAPITAL
Personal Money:
When I left corporate America, I had money in my checking and savings accounts, a 401(k), and a consulting side hustle. I also made significant lifestyle changes to save on cost of living, like moving back into my parents’ home. This did create additional stress, but it also gave me an extra incentive to see my business succeed as fast as possible. This money got me through the year to live off personally, while making the initial investments into my business.
I also took advantage of 0% APR (annual percentage rate) credit cards to finance the business, which I definitely recommend doing. I secured several credit cards up to $50,000 at 0% APR, where you pay the minimum amount due and no interest is charged for up to 12-16 months. The downside is that if you 1) cannot make the minimum payment or 2) cannot pay off the total before the 0% APR ends, then you’ll pay more than you owe. The rule of thumb here (which again, I learned after the fact) is that it takes at least three years for any company to make a profit. Most banks/investors will want to see you have some skin in the game—so be prepared to at least invest a little bit of your personal money.
Looking back, as soon as I made my first business transaction, I should have started a separate business checking account, business credit card and subscribed to an accounting software. Take it from me: be sure you track how much money you personally put in so that if you do get investment in the future, you get paid back for your owner's investment.
Family and Friends:
When I first started out on my journey, I fortunately had a lot of people offer to give me money—but I’d heard that taking money from family and friends can lead to a dangerous impact on your own personal relationships. On the flip side, it can also have a positive impact in creating pressure on you to see things through due to the potential impact on those relationships.
Instead, I ended up creating a GoFundMe. This allowed me to make the initial investment into various supply chain partners to develop my product and have capital to finance the first bulk production order. This also validated the product concept and idea that I had market approval. This was important to me because I had seen people go full-force on products before without testing the market and be stuck with a lot of inventory, so this was my solution.
Crowdfunding:
If you’re in the apparel industry, minimums to place a bulk order can be high, which is why you usually need a sizable chunk of money before placing your first order. The way that I did that was by creating a Kickstarter campaign to ensure that we hit the minimum amount needed to place an order, thereby guaranteeing we had hard orders to fulfill. It took me about two months to find partners to bring the Kickstarter campaign to life. I reached out to local colleges and universities in my local area and took referrals to secure the right people for each job.
The key takeaways with crowdfunding: 1) set a goal that ensures you cover your costs and are profitable 2) make sure you have the number of people in your network to hit your goal 3) be prepared for the highs and lows.
There are several resources that I would recommend if you decide to crowdfund; Indiegogo and iFundWomen are other players in the game. Factory 45’s Crowdfunding Course has fantastic information on creating a press kit to help promote your campaign, too.
Incubators and Accelerators:
When researching entrepreneurship-related networks and resources, one of the most helpful was the (free) Small Business Development Center (SBDC). For similar resources, I recommend checking out local colleges and universities to see if they have any incubator programs. In my case, University of North Florida (UNF) had just opened up their Innovation and Entrepreneurship program, which myself and my business are now part of. The benefit of these centers and programs is that you receive access to free resources like legal advice, accounting and bookkeeping services, mentors and entrepreneurial energy. Once you complete these programs, they usually offer access to investors to help jumpstart your business, too.
Loans:
For the sake of transparency, I haven’t had the best experience with securing traditional loans—so take this bit with a grain of salt. My experience is that Small Business Administration (SBA) loans are usually for businesses that have at least three years of financials under their belt, with the available collateral to match the loan. It’s ironic because the things that I thought made me the most ideal for executing a business—i.e. I was single, no children, no house and no full-time job—are actually the things that the banks look for to ensure they have a safety net to receive the money back. I recommend reaching out to banks that you currently bank with to learn about their offers as well.
If loans aren't in the cards for you yet, I also recommend applying for grants (aka free money), checking out pitch fest competitions, or looking into more tech-y opportunities like bitcoin.
EQUITY CAPITAL
Investors:
Investors are a form of capital that I’ve personally steered clear of for a while, based on my own experiences. Working in Corporate America, I often saw decisions made due to the desire to return the investment to the shareholders as soon as possible—which I don't exactly agree with. It’s why I have been adamant about maintaining 100% control of my company to ensure its ethos are not diluted.
That being said, I have since started to meet with potential investors who have experiences, resources and most importantly patience that are in alignment with where I envision my company going. I’ve started sorting the investors into two categories: angel investors and venture capitalists.
An angel investor is an individual who provides capital for a business startup, usually in exchange for convertible debt or ownership equity. Angel investors usually give support to startups at the initial moments and when most investors are not prepared to back them. Venture capital is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth.
Typically, you’ll look for angel investment because you won’t have to give as much equity away (if any) to secure the capital, whereas VCs will often require equity for financial capital, and a tighter time period to return that money.
If you do decide to go the investor route and are in negotiations, make sure that you secure terms that will not compromise the reason why you set out to start your business in the first place. And whatever you do, do not compare yourself to your competitors! A press release statement showcasing the capital secured by a business can be alluring, but remember that the return on that investment is almost never released. Point being: don’t be intimidated; let the numbers drive the capital request.
I also recommend compiling a list of brands that you admire and researching where they got their capital from on Crunchbase. Check out the websites of those investors and if they have an email list, sign up, and start recording all of the investors that you think would be interested in partnering with you. I get great tips and tricks on industry trends from the newsletters that I receive on a weekly basis.
My hope is that this should at least give you a high-level overview of what’s available and how to find what fits for you and your business. Remember, always negotiate and get several quotes to compare. A podcast that I often listen to for inspiration is How I Built This with Guy Raz. What you’ll learn by listening is that every entrepreneur builds differently, so there is no one-size-fits-all.
Each step in the business process will feel like a mountain, and each time you climb it, you’ll think you’re in the clear—but there will be another mountain to climb. Don’t grow weary. That’s part of the process, and part of the reason why so many people are afraid to try.
Everyone will try give you their two cents (pun intended), but remember that those two cents won’t always help you maintain your vision, so listen to your gut and enjoy the journey.
After all, the best revenge is your paper.
Brianna Kilcullen is the founder of Anact, a sustainability consultant, and a hemp hustler. Prior to Anact, she worked in the apparel industry for prAna, a subsidiary of Columbia Sportswear and Under Armour. She has traveled to more than 40+ countries and has worked in factories on almost every continent. She graduated from The George Washington University International Business program and is a dual citizen in Ireland and the United States, and always welcomes conversations surrounding the 17 UN Sustainable Development Goals, Africa, and her favorite Chance the Rapper song (which is ever-evolving).
