The Next Big Thing in Funding For Tech Startup Businesses
The landscape of startup funding is constantly changing. We’ll take a look at what kinds of capital are available to startups, whether they’re just starting out or looking for Series A/B/C drips of venture capital.
As far as product-based startups go, there’s not just one avenue for getting funded anymore. The old guard still exists – friends and family, small business loans from banks – but the new guard are the micro-VCs, crowdfunding options like Kickstarter and Indiegogo, angel investors who invest their own money in small deals through equity crowdfunding platforms like AngelList , and accelerators that offer assistance in exchange for some percentage of your startup when you graduate. Before we move ahead with the details on funding if you are an entrepreneur we would suggest you to know more on pro rata.
Here’s a quick summary:
Friends & Family
As an entrepreneur, it’s important to cultivate your personal network for more than just LinkedIn connections. If you’re lucky, you’ll have people who believe in your cause enough to invest their own money into the business with no expectation of return. Be aware that this is a major red flag when future investors ask about your initial funding – they will wonder why someone thought so highly of the idea that they invested on faith alone.
Bank Loans & Credit Cards
Banks are more likely than any other source of funding to offer entrepreneurs loans or credit lines; some banks may even give out operating capital after seeing your initial receipts and projected expenses (they want to be sure that, if anything goes wrong, they can cover it Make sure you’re not borrowing more than you need – if you can’t pay back the loans and interest, your business is finished.
Sites like Kickstarter and Indiegogo have become hugely popular avenues for product-based startup companies to get funding for their products. The key difference between crowdfunding and a bank loan/credit line is that with crowdfunding, you’re selling an idea instead of borrowing money; in essence, you’re pre-selling your product in return for capital to produce it. If the market doesn’t want it when it’s done, then no harm no foul (unless that was part of your agreement). It may be frustrating to make a T-Shirt printing company only to discover that nobody wants T-shirts with your logo on them (true story), but that’s better than going into debt just to find out. Btw, just a quick check, did you know about SPV?
Angel investors are the next step up from crowdfunding, in a way. They’re accredited individuals who invest their own money into startup businesses in exchange for a percentage of equity. These aren’t small deals either; very often, angel investors will write checks for hundreds of thousands or even millions of dollars to get startups off the ground. The cost? You’ll usually give away anywhere from 10-40% of your company’s stock, which means if you want them involved, they’re going to be major decision makers when it comes to business strategy and management processes.
Venture studios are also known as “Startup Studios”. They partner with companies on projects from the early stages, provide companies with the initial team, capital, and strategic direction, and are closely involved in business operations and decision makings. A venture studio business model for b2b provides resources to startups and helps them come up with the product-market fit. As a result, the partners involved experienced consistent success in comparison with accelerators and incubators.
Accelerators like Y Combinator TechStars have been around since the early days of startup funding, but they’ve become increasingly popular because of their efficiency. Accelerators are competitive – the best are funded by VCs themselves, who have invested in prior companies that have “graduated” from other accelerators, so only the very best startups are accepted. Why does this matter? Because accelerators don’t just give you money up front; they also offer guidance for building a successful company . They might be able to get your business off the ground faster than you could on your own, and with less risk to boot. That’s tremendously valuable – getting advice from people who’ve built businesses means you can focus more on something like revenue generation instead of wondering whether or not your idea is any good.
Wrapping it Up
At the end of the day, it’s impossible to say with certainty which option is best for funding your business. There are simply too many variables and not enough information to go around; you’ll need to make this decision yourself when the time comes. All we can tell you is that each option has its own downsides and upsides – there’s no such thing as a free lunch when it comes to startup funding (except for maybe crowdfunding); even if someone gives you money without expecting anything in return, there’s always the risk that they’ll lose faith and pull out at some point down the road, which leaves you with nothing but an uncertain future and a failed business on your hands.