So your tech startup has a great idea. You’ve assembled a small team of bright, creative minds and you’re convinced that you’ve developed a concept that will change the world. Or failing that, make a ton of cash.
All you need know is the money, fast. Here are some of your options.
1 – Get a loan
The classic way of funding a business. However, finding finance from traditional means is unfortunately not as viable as it used to be. It is still possible to receive business loans from banks but since the credit crunch financiers have become much more reluctant to lend – especially to small startups.
To get a loan you’ll need a strong business plan, a good pitch and a relatable idea. You may find that it’s more worthwhile working with more local, community-based banks or those that specialise in your industry. They’ll be able to understand where you’re coming from and be more likely to accept your application.
2 – Crowdfund it
In the past few years, sites such as Kickstarter and Indiegogo have emerged as a viable source of funding for a wide range of startups.
However, it’s fair to say that you’re going to encounter plenty of competition on crowdfunding websites. Plenty of projects fall by the wayside without making a splash.
Startups of all shapes and sizes will venture onto these communities in order to find the capital for their idea and if you’ve a good idea that captures peoples’ attention (with excellent potential rewards) then there’s a chance you can make crowdfunding work for you.
3 – Find an angel investor
Perhaps the Holy Grail for tech startups is the angel investor. These Dragon’s Den-type individuals can be as young as 30 in the tech sector and will be looking to invest their personal capital in startups in exchange for a stake of the business. Unlike venture capital firms, many investors will want to have a say in how the business is run, but will usually be more likely to take risks and invest more money.
(Image: Randy Robertson under CC BY 2.0)
The process is as attractive for investors as it is for the money-hungry business. The investor gets to get involved in an exciting new venture and reports suggest that the average angel will make 22% and 27% IRR (internal rate of return) on their investment in the UK and US respectively.
4 – Get a grant
Sourcing a grant for your startup is even better than angel investment. Although you can’t enjoy access to the insight and advice of a professional that’s been there and done that, accessing funds from grants or by winning competitions is a great way to kick start a company without giving away precious equity.
Grants are often ring fenced. You may, for instance, receive funding in order to employ a specific amount of staff or to provide services for a targeted demographic. But if it’s ring fenced in a way that suits your business, it’s well worth looking at.
Of course, competition is hard and it’s tough to find grants and competitions that are feasible. Again, it’s best to think local and manipulate any niches that you can think of. If you’re US based then this website which details all the US Federal Grants is a great way of ascertaining what you could be entitled to.
Positioning your brand as a niche in order to access grants isn’t just great for accessing hard-to-reach money, you’ll find it an invaluable experience once your business is off its feet as you understand how to make it stand out in its market.
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