Traditional methods of venture capital that were developed in the early 20th century have been pretty satisfactory for most companies that seek to expand around a new product idea.
On the other hand, Lehman Brothers, perhaps the company who developed the modern concept of venture capital the most, ended up being allowed to go bankrupt during the US economic downturn of 2006-08.
At the same time, other financial models that were thought to be solid ended up performing worse than expected, adding to the need for some innovation in financial services when it came to working with startups.
One answer that became quite popular was to use crowdfunding to get individual contributions until a financial goal was reached that allowed a company to get production started. Here are some other options that have helped broaden the approach that companies take when they are seeking to grow their young companies.
Initial license offerings
Different from crowdfunding in that you are actually selling an intellectual property license, Initial License Offerings, or ILO’s are structured to be a simple way for a company to raise the capital that it needs to get production started.
Another difference for those that are considering crowdfunding is that if you are raising hundreds of thousands of dollars, there will be quite a bit of reporting necessary due to SEC rules. When you offer an ILO, you have no reporting obligations except to your customers.
One caveat is that it then becomes important for you to focus on selling your ILO on a website that will validate your intent so that your customers will have as much knowledge as they need to when assessing you as a firm.
The birthright program
Israel is one of the most innovative business communities in the world. They have long amazed outside observers with their collective farming businesses that branch into high tech and then scale up. The Birthright Israel program is another type of program that offers an accelerator environment for entrepreneurs that qualify.
Known as the Birthright Excel program, it lasts for 10 weeks each year. Rather than focus on fundamentals, the program instead selects entrepreneurial students from around the world that are achieving academically. Each student is then put into a realistic environment where they need to advance the company concept that they intended grow.
After 10 weeks of being in a cohort with other students, they present the updated company to the local financial and business community. The net result is that Israel is able to get a first look at new technologies and business ideas.
At the same time, the entrepreneurs receive valuable experience and are able to interface directly with professional financiers that are intent on looking at their opportunity.
Business processes and implementation ideas have been evolving since the age of Pharoahs in Egypt. Many of the old documents that are found are actually business invoices and ideas that help business grow.
The 20th century brought us the concept of modern venture capital. Today in Israel, the 10 week cohort known as Birthright Excel continues to build business tradition by being innovative and accessible.
Many small business owners struggle to to grow their business once they have taken off. You can also consider peer-to-per lending, invoice finance, asset-based lending and angel investment. If all options fail, you can always go back to friends and family for that all important push to grow your business.