May 30 - 5min readFive Ways to Find Funding for Your Tech StartupBy Borne
Whether you’re a veteran entrepreneur or just starting out with your first tech venture, funding is a crucial component for all businesses. Without proper funding, you can’t build your brilliant product and bring it to market.
But where do you start? What are investors looking for? How do you attract the capital you need to take your startup from a rough idea on a napkin to a full-fledged business?
It’s not always easy. In fact, for most entrepreneurs, it can be downright frustrating. But if you’re keen to put in the work and do your research, you can find the funding required to make your dream a reality.
To get you going in the right direction, here are five proven paths to funding your tech startup:
1. Angel Investors
Angel investors are high-net-worth individuals who invest their own finances in startups in exchange for equity (a percentage of ownership). There are numerous angel investors out there, and they come from all walks of life: doctors, lawyers, accountants—you name it! They may or may not have background experience investing in tech startups, but they’re interested in helping new businesses get off the ground.
2. Venture Capital (VC)
As the name suggests, VCs provide seed capital for early-stage startups that have already proved their viability by demonstrating real traction with customers and revenue generation—but only after they’ve passed an extensive due diligence process designed to screen out bad ideas and incompetent founders.
VCs often make larger investments than angel investors do. However, they expect higher returns on their investments and more control over how the funds are used. VCs typically take a significant stake in exchange for the capital they provide, usually between 20% and 40%.
They also offer valuable industry connections as well as guidance from experienced executives and mentors who can help your company grow into a market leader, while avoiding many common pitfalls along the way.
Crowdfunding is perhaps one of the most resourceful ways to get funding for your tech startup via online donations or pre-orders. Platforms like Kickstarter, Indiegogo, and GoFundMe allow people to pledge financial aid towards projects they want to see happen.
It’s a popular way to raise funds because it’s free and accessible to anyone with a concept they want to pitch and bring to life. The idea is that if enough people pledge, then the project can be funded and become a reality.
However, if not enough people commit, no funds are exchanged, and the project doesn’t go anywhere. This means that if you’re going to use crowdfunding, you’ll need some serious hustle in order to get enough funds together before your deadline. Make sure that you have a good marketing strategy in place so that you can convince enough potential backers why they should support your project.
Crowdfunding is an excellent way to tap into your community and build up a support base before ever asking for investment dollars from outside sources. Plus, crowdfunding sites give you access to an audience that’s already interested in what you’re doing, which means more potential customers.
4. Accelerator Programs
Anywhere from several months to 2 years long, accelerator programs are intense startup incubators that provide funding, mentorship, networking opportunities, office space, and other resources in exchange for equity in your company (usually around 10%). Some accelerators are more selective than others—but they all offer valuable connections that can help get your outfit off the ground (and keep it there).
If your company gets accepted into an accelerator program, it will be much easier for you to get funding later on. Investors will see that other people have already taken an interest in what you’re doing.
In addition to funding, if you’re looking for help with mentorship and guidance from an experienced team, an accelerator program may be a good fit for you.
Self-funding your tech startup may seem like the least tempting option. How far can I get with a few grand, you might ask? The honest answer: much further than you think.
Occasionally referred to as “efficient entrepreneurship,” bootstrapping your firm means expanding your business with little to no venture capital or outside funding. It means operating and growing your business solely on your own savings and income (a.k.a blood, sweat, and tears).
Three key advantages of self-funding right off the bat include:
- Control: The most significant benefit of self-funding a tech startup is that you are in total control of your business and can make decisions without criticism, expand at your own speed, and not worry about generating short-term returns.
- Time and effort saved: Finding funders can be a full-time job, requiring time away from the business. By bootstrapping, you’ll be able to focus solely on developing your enterprise.
- Discipline: Spending your own financial resources requires an outstanding level of discipline. Self-funding has forced many tech entrepreneurs to be more imaginative and innovative in their approaches, which can only be beneficial.
Bootstrapping can be a brutal experience, but the payoff is usually worth the beating. Launching a self-funded company challenges you to concentrate heavily on business planning in order to create income as quickly as feasible.
One unifying trait you’ll see in successful bootstrapped tech firms is that they all have a winning business plan from the get-go that generates revenue as quickly as humanly possible. With no cash inflow, a bootstrapped company would deplete its reserves before establishing any significant traction. It’s critical to concentrate on this strategy early on.
Closing Your First Investment
With so many innovative startups out there, it can be hard to get the funding you need to get started—especially if this is your first time raising capital for a business. Fortunately, there are ways to increase your chances of securing funding for your startup—and at TK, we’re here to help you accomplish just that.
Our mission is simple: assist tech founders in landing investment capital for their startups. Securing funding can be a fun and exciting experience, but it also requires a ton of planning and research. You need to know how much funding you’ll need, where to get it, and how to handle it once it’s in your hands.
As we’ve discussed, getting investors on board isn’t easy. Many factors go into determining how much capital is invested in your company, including its industry, your personal background and experience, and the amount of risk involved overall. You’ll have to convince them that your idea is worth their hard-earned finances and that you’re the right person to take it from concept to reality.
You’ll need a solid business plan in place before approaching investors with your idea, but if you don’t know where to begin—we’ve got you covered.
Ready to get started? Connect with our team today.