Big decision: How do you fund your new business?
— -- John Scala has one supportive wife.
The entrepreneur plowed through his savings as well as cash from his mother, father, sister, uncle and mother-in-law to open a barber shop. When he needed even more cash to complete construction of his downtown New York City venture, he and his wife sold her 5-year-old engagement ring.
The 2-carat princess-cut ring fetched $9,000, which helped launch The New York Shaving Co. in 2008.
"Thank God it was a nice ring," Scala says.
Such a scramble for start-up capital is not uncommon.
Budding entrepreneurs often face tough financial decisions, such as getting a loan that charges interest, trading a company stake for cash or selling valued assets such as an engagement ring or stock to fund their ventures.
No iron-clad fundraising rules exist, because each circumstance is different, says Raman Chadha, executive director of the Coleman Entrepreneurship Center at DePaul University in Chicago.
Money-raising techniques depend not only on the type of firm being started but also on the personal situation of the entrepreneur launching the business. For example, a single, 28-year-old may be able to take on more financial risk than a 38-year-old who has a family to support and a mortgage to pay, Chadha says.
His advice: tap into local entrepreneur groups and universities to find funding opportunities.
Veeral Rathod says research, networking with peers and soliciting advice from successful entrepreneurs helped him and partner Hil Davis successfully raise capital for their men's clothing company in Dallas, J. Hilburn.
The initial cash infusion came from each founder's savings and from family and friends. The specialty high-end-shirt maker launched in 2007.
"A year into the business, we realized that we had something that was working, but it was severely underfunded," Rathod says. "We thought, 'We could go to friends and family, or we could go the institutional direction.' "
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