So you want to fund a student business? Here’s how

Unless you have generous friends and family or happen to stumble upon some angel investors (people who invest money and expect no repayment), chances are that you’ll need some financial help to launch your business.

Traditional investments from banks and venture capitalists can provide large sums of money but often at the cost of exorbitant loan repayments and large percentages of equity (ownership of your company). Thus, most entrepreneurs prefer alternative sources of funding and only use the traditional means as a last resort.

Penn State’s Small Business Development Center (SBDC), with its experienced consultants and network of campus and community partners, can help in the search for alternative funding to start a business. Free consulting is available by appointment or drop-in at Kunkle Lounge from 4 to 5 p.m. on Tuesdays and Thursdays.

Here are other great resources available to Penn State student entrepreneurs:

-- Crowdfunding (raising many small amounts of money from a large number of people) has grown in popularity over the last several years. According to Penn State’s Office of Annual Giving, crowdfunding raised more than $5 billion last year worldwide, making it the number one channel for raising money online.

-- Penn State began the SparkPlug program in 2011, offering grants of up to $500 to student groups to help start their own crowdfunding campaigns. This year, the University is going a step further by partnering with USEED to host its own crowdfunding platform for student organizations, faculty-led research projects and other University programs. Teams will be accepted into the USEED program each semester and will be mentored in crowdfunding before launching a 30-day campaign on the platform. According to USEED, teams that go through their program average $5,000 raised per campaign.

-- Lion Launch Pad helps student entrepreneurs create companies out of innovative product and service ideas. It provides selected teams with rent-free workspace, mentorship from skilled professionals both on-campus and in the community, and funding in three different forms: no-payback seed grants of as much as $500, loans and equity investments at 1 percent for every $1,000 invested. Teams comprised of more than 51 percent Penn State students are eligible to apply.

-- To test the viability of a product or service idea in a certain market, consider applying for a research grant. Most colleges at the University will offer grants to help defray research costs for undergraduate students if the work pertains to academia. Ask advisers about upcoming business competitions and programs.

For example, the College of Agricultural Sciences holds the Ag Springboard business plan competition annually, offering $7,500 and a spot with Lion Launch Pad to the winning team. Then there’s the 1,000 Pitches competition, hosted at Penn State by Innoblue. The contest collects short video pitches for businesses or solutions to world issues in nine different categories and awards $500 to the winner of each category.

For more tips about alternative fundraising from successful entrepreneurs, don’t forget to join the SBDC for Penn State’s Global Entrepreneurship Week (GEW) Nov. 16 to 20 for a weeklong series of informational and interactive events directed at students and community members interested in entrepreneurship.

Contacts: 
Last Updated October 21, 2014