If you’re building an app or founding a tech startup, it can be overwhelming, especially when you start to navigate the funding world. It can be difficult to determine how to go about backing your big idea because there are so many unknowns. Luckily, we’re here to help. This blog will dive into the dos and don’ts of funding your big idea as well as tips and tricks for financing your startup.
It’s important to first understand the different types of funding that are available to you as an entrepreneur. There are many different avenues that you can pursue including angel investments, or even government grants or business incubator programs.
Let’s dive into each avenue a little more:
A Personal Investment
When starting a business, you should be your first investor. Not only does investing in your own business demonstrate that you’re passionate about your idea, but it also reassures other partners or investors that you're committed to the success of your business.
Friends and Family
Investments by friends and family are often provided by people within your network that believe in your cause. These types of investments are referred to as “patient capital” and will be repaid as your business grows and becomes profitable.
Crowdfunding
Crowdfunding entails seeking investments or backing from numerous individuals instead of opting for a venture capitalist firm, angel investor, or accelerator program. In exchange for supporting your company, backers will typically receive some type of reward. Common crowdfunding platforms include Frontfundr, Kickstarter, Indiegogo, Crowd Supply, and Experiment.
Angel Investors
Angel investors are often executives or industry leaders in their respective fields. In exchange for investing in your business, they reserve the right to supervise your company’s management practices and may request to have a seat on your company’s board of directors.
Venture Capital
Venture capitalists are looking to back specific kinds of startups in sectors like information technology, communications, and biotechnology. Partnering with a venture capitalist also means that you will have to give up some ownership or equity in your company. When choosing which venture capitalist to partner with, it’s important to choose someone that brings a wealth of knowledge and expertise to your business.
Business Incubators
Business incubators are not only a great way to get funding, but they are also a great resource for learning the ins and outs of founding a tech startup. Business incubators usually assist startups in the early stages of development so founders just like you can gain the support you need to bring your ideas to life.
Government Grants and Subsidies
Government agencies provide grants and funding for all kinds of businesses and tech startups. Applying for grants or subsidies is an intensive process that will require a lot of leg work and preparation. Generally speaking, you will have to provide a detailed project description, an in-depth explanation of the benefits of your product or service, a detailed business plan, background information on key stakeholders, and completed application forms.
What Will Hinder my Ability to Get Funding?
If you’re applying to business accelerator programs or looking to secure a government grant you will have to make sure to do your research and present the validity of your business in a clear and concise way. If you fail to present your research in a clear way or can’t communicate the relevance of your ideas, it may negatively impact your ability to get funding. Building a solid prototype and leveraging minimum viable product (MVP) is a must.
What Criteria do I Have to Meet to Get Funding?
Investing in a tech startup or a business in it’s in early stages can be risky and that’s why potential investors will want to make sure that you’ve accessed all the risks. It’s important to perform a risk analysis so you can confidently convey your risk mitigation strategy or SWOT analysis to anyone that asks.
In addition to accessing your risks, it’s important to create a solid business plan. You will have to create a solid business model that encapsulates things like a competitive analysis, a revenue model, customer segments, distribution channels, and more. It’s also important to take your market size into consideration. Understanding how big your potential market is will help venture capitalists and angel investors understand how your company will grow based on the size of the market.
Not only are investors investing in your business, but they are also investing in you. The majority of early-stage investors report backing the people behind the business rather than the business itself. Investors will look for passionate skillful founders or teams that have a proven track record. Passion and a can-do attitude will trump competitors with great ideas and sub-par teams.
Funding Your Company Takes Grit
Funding your company takes grit. It’s a long process that takes a lot of hard work and it's important to not get discouraged. Building relationships and nurturing connections is just as important as securing an investment. If an investor says no today, add them to an email list and keep them updated on your progress. It's important to share your story and knock on as many doors as possible. A no today could be a yes tomorrow.
Where Do I Start?
Marketplace Studio is a closed development marketplace that offers an end-to-end ecosystem that connects people like you with a collaborative team of experienced professionals that can help bring your idea to life. When you bring your idea or project to Marketplace Studio, you will be assigned a project manager that will be dedicated to your project from start to finish. Our team of industry experts will ensure that you have all of the tools you need to seek funding.
Bring Your Idea to Life
Not only are we here to bring your idea to life but were also here to help you navigate the ins and outs of the funding world. If you need help building out a software project, or just simply want to learn more about what we do you can book a complimentary 30-minute consultation. Click here to get started.
