Since 2008, startup companies have struggled to get the funding they need from traditional funding sources such as banks and venture capitalists. With the need for financing persistent through every growth stage, many entrepreneurs have to be more creative and find alternative funding sources. I decided to look into an alternative funding source that many do not associated with innovative technology – a local bakery.
Around October/November 2008, I began talking to Polarbröd, a large, 20-year-old, family-owned bakery in Sweden. Although our businesses were in two completely different industries, Polarbröd thought it was a great time to invest, as people buy more bread in downturns, and they understood the potential of investing in a promising tech-based company like Nordic River. What seemed like an odd partnership in 2008, has turned out to be a successful deal for both parties. Since we secured the funding, we have signed partnerships with Box.net and Google, have had numerous product rollouts, and have experienced tremendous user pickup and company growth. Based on securing funding in unlikely spots, here are a few of my tips on securing alternative funding:
• Recognize your strengths
My first idea for funding was to go into Stockholm and go to every bank as I was convinced I could find funding easily. However, when I went to the Stockholm banks they turned me away. It made me think about what advantages I had over my competition. I had to put myself in the banks’ shoes - Why am I worth the funding? That question will make you recognize your strengths. Take your strengths and harness them. This is your advantage over your competitors and how you will persuade someone to fund your project.
• Go local
Local businesses love supporting neighbors, so use this to your benefit. When I went to the Stockholm banks, they did not see me as one of their own. However, when I went back to my hometown and changed the name of my company, Nordic River, to reflect a pride and sense of community, I was greeted with more respect. The people you approach in your community know and trust each other. Before you go and meet with your local businesses make sure you do your homework - what is their background, have they invested before, do they have the money to fund you, what do they want to invest in, and what will they get out of the partnership?
• Value of a handshake
In the initial meeting, go see them in person. Having someone look you in the eye and shake your hand is a trust building action. Also, do not ask for funding in the first meeting. You need to build the business relationship - ask questions and listen to what they are saying. Last but not least, be patient. The company needs to trust you and your product - your success will be their success and vice versa. They are investing their hard earned money. It took me over a year to finalize the funding with the bakery.