Some of today’s successful and most celebrated startup companies were founded by student entrepreneurs in college dorm rooms. They include Facebook, Google, Snap, Yahoo, WordPress, Brex, Dell, and Microsoft, just to name a few. The importance of college-age entrepreneurs in the startup ecosystem can’t be overstated.
If you’re a student entrepreneur looking to launch and build your startup company while still in college, it’s possible to achieve long-term business success— just like today’s most iconic founders who started their startups whilst still studying in college. As with every entrepreneur, one of the challenges you’re going to face is how to get the appropriate funding for your new startup business. The only way to ensure your brilliant startup ideas fulfill their potential and your new business gets off the ground is to secure financial backing. With that in mind, here are five ways to fund your dorm room startup.
Join an Incubator or Accelerator Program
Ask any successful founder, and they’ll tell you starting and running a startup company can be lonely and overwhelming. The startup scene is usually very complex and competitive, which is why many student entrepreneurs are always looking for investor relationships and mentorship opportunities that accelerator and incubator programs offer.
If your startup is still in the ideas stage and you’re looking to refine your ideas and develop and build your Minimum Viable Product (MVP), joining a startup incubator would be the best move. However, if you already have some initial traction and are looking for mentorship, access to investment, and connection to business partners to accelerate your startup’s growth, an accelerator program would be a better fit.
Make sure you join a credible accelerator program that has a track record of building successful startups. Most accelerator programs fund their graduates to a tune of $20,000 to $80,000. Check with the entrepreneurship center at your college for any university-affiliated accelerator programs you can join. Downside: Incubator and accelerator programs are highly over-subscribed, and it can be hard to go through.
You’ve probably seen individuals or even business organizations running crowdfunding campaigns on various internet platforms in an effort to raise funds and create public interest for their projects. The interesting thing about these campaigns is that anyone can launch a campaign and obtain funds for their business as long as they can create a compelling pitch—one that gives an overview of your startup and demonstrates your business’s potential for growth.
Crowdfunding platforms can either be donation-based (e.g GoFundMe), rewards-based (e.g Kickstarter and Indiegogo), debt-based (e.g LendingClub) or equity-based (e.g StartEngine). It’s important that you adequately research the different platforms available and read the specific rules on each platform before choosing one that works best for your startup.
Downside: Capturing the attention of people, getting your voice heard, and convincing people that your startup company is worthy of their investment can be an uphill task due to the heavy competition on these platforms.
Talk to Family and Friends
Family and friends can provide you with the very first outside capital for your dorm room startup before you can approach independent investors or get accepted to an accelerator program. In some cases, investors and lenders might not be willing to invest their money with you and the only people who believe in you are family and friends. So, don’t be afraid to talk to your loved ones about your new venture or business idea as they might provide you with the capital you need at very favorable terms.
If your parents are ages or older and own a home, you can ask them to help fund your startup by tapping into their equity with a reverse mortgage (learn more about the pros and cons of a reverse mortgage here: https://reverse.mortgage/pros-cons). You can also bring your family and friends on board as investors whereby they give you a business loan that you’ll repay with interest or they invest their money and you offer them an equity stake in your company.
Pros: With friends and family, you don’t have to worry about drafting a pitch deck or impressing potential investors. It’s a pretty straightforward and easy way of raising money for your dorm room startup since you only need to make your loved ones believe in your startup idea. Another advantage is that you’re likely to get more favorable financing terms and there are no pressures or expectations.
Downside: Your next family reunion might end up not being as fun and exciting if a good number of them feel screwed over. In other words, unless you spell out everything clearly, you risk ruining relationships when you turn to friends and family to fund your startup idea. Additionally, this type of startup funding offers limited capital and may not be reliable if you need huge capital.
Apply for University Grants
Universities and colleges sponsor innovation grants that are usually open to student entrepreneurs creating novel products and launching new ventures. Obviously, these grants don’t come with a massive check, but they certainly provide some funding that you can use to support your activities and accelerate your startup’s growth.
Some of the grants aimed at student-run startups include Bow Capital, CRV, Pear VC, The House Fund, Dorm Room Fund, Xfund, The MBA Find, Bolt, and 8VC. Also, check with your university or college to see if they have their own grants and funding programs. Drawback: These university grants are highly competitive and only the most promising startup ideas get rewarded.
You may be a first-time student entrepreneur but that doesn’t mean you can’t self-fund your new business. Utilizing your own savings to fund your dorm room startup is what’s often referred to as self-funding or bootstrapping. Over 90 percent of startup companies start and operate without getting grants or business loans. So, you’re not alone if you choose to take this route.
The good thing is that self-funding allows you to retain complete control over your startup and be unburdened of the pressures, expectations, and interests that come with other funding options. Additionally, there are fewer or zero formalities and compliances as you’re financing your new venture all by yourself. Keep in mind that bootstrapping can also mean using money from mortgages and low or no interest credit cards. Downside: You may be left with a substantial amount of debt to clear in case your startup company fails.