7 Ways to Secure Funding for Your Tech Startup

In the early stage of launching a startup, it’s normal to be so enraptured with your idea that you develop a sort of tunnel vision. Either that or to look off into the future, concerning yourself with problems like recruiting and retaining top-tier talent.

But before that, you have to find a way to pay for it all.

All startups are born from an idea, something innovative that beats against the currents. But without proper financial backing, many of these ideas fail just as they’re getting off the ground.

You’ve probably heard the grim statistics on startup failure. One of the main reasons that businesses fail in their first months and years is due to the chronic cash paucity that often comes with launching a new business. 

So if you want to beat the odds, securing enough startup funding to allow your enterprise the flexibility it needs will be essential to your success.

7 Ways to Secure Startup Funding

2018 was a good year for startups. Defying economic anxieties, the total number of new businesses started in Britain actually increased by 5.2%. While this is good for the economy as a whole, it can present a challenge for entrepreneurs seeking funding.

Professional investors place a great deal of importance on your previous experience running a business, and with the number of new startups surging last year, they can afford to be especially discerning. This can box out a large portion of entrepreneurs who are trying to get their first startup off the ground.

Even if they are interested in your startup, they will expect a share of equity and control in the company, which you may not be willing to give up.

For this reason, you may opt for other ways to fund your business, including:

1. Applying for Startup Loans

Most banks offer small business loans that can give you the capital you need to get your startup off the ground. However, this will usually only be an option if have a strong credit history and/or sufficient collateral that you can put up for security.

There are also services that specialize in startup lending. These loans are government-backed and have a fixed income rate.

2. Joining a Startup Incubator or Accelerator

These are organizations that support startup and small business development.

Most are associated with universities, community development organizations, or large companies. They provide resources like office spaces and consulting services for free or at reduced costs, which can help put a dent in the amount of startup capital you need.

Some even provide seed funding for small businesses.

3. Angel Investors

Though frequently conflated, angel investors differ from venture capitalists.

Most metropolitan areas have high net-worth individuals interested in supporting local startups. While some will demand a share of equity in exchange for funding, some may be willing to exchange funding for convertible debt.

Many angel investors are current or former entrepreneurs themselves. While money is, of course, their primary concern, many support startups out of a genuine interest in the idea and the desire to see the business become a success.

4. Crowdfunding

While sometimes derided due to a number of high-profile failures, crowdfunding is not to be overlooked. When promoted properly, a crowdfunding campaign can raise substantial funding.

A good example is Occulus Rift, who launched a campaign to raise $250,000 with the aim of producing high-quality headsets. But on the strength of their presentation, they ended raising nearly ten times their goal and established themselves early on as a leader in the burgeoning VR market. Two years later, Facebook bought Oculus for $2 billion.

So with a strong enough pitch, crowdfunding options can neatly meet and exceed your requirements.

Plus, crowdfunding platforms have diversified in recent years, giving entrepreneurs more options for sourcing capital.

Crowdcube and Seedrs are two UK-based crowdfunding platforms that allow small investors to put up funds in exchange for equity. Each have their own set of policies and fees which you’ll want to consider before choosing an option, but the choice gives you more leeway to find the right option for your startup.

5. Small Business Grants

There are government funds allocated to support new businesses. Some are meant to boost economic development in low-income areas, others are for advancing science, medicine, and education.

The process for applying for these grants can be long, but at least they don’t demand equity in return.

6. Help From Friends and Family

They say among friends you should neither a lender nor a borrower be, but when you’re trying to launch a startup, that becomes more of a flexible guideline than a rule.

Friends and family are among the most common investors in small businesses. And that initial seed money can help you raise larger funds down the road.

For example, if you do seek funding from a professional lender, they will usually expect you to already have some commitments to your cause. From their point of view, if you can’t sell your friends and family on the idea, why would they want to back it?

7. Self-Funding

As the barriers to entry for most tech businesses have declined over time, more and more entrepreneurs have turned to their own cash reserves to launch their projects.

If you’ve already saved up a substantial sum, like a downpayment on a home, you could instead use that as your startup capital.

It’s a risky move to be certain, but if you believe in yourself and your idea, it can further incentivise you not to let yourself down.

Building Your Future Foundation

This stage of startup development can make or break your business.

You’re laying the foundation on which you will build your enterprise, and the amount of startup funding you can raise will affect the quality of that foundation.

But lay it well, and you can set your mind to those other concerns, like recruiting the talent that will build your business moving forward.

For some tips on that, check out our guide to building a company culture that will encourage talent retention as your business grows.

This article first appeared on the Devanta blog at https://www.devanta.io/7-ways-to-secure-funding-for-your-tech-startup/

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