Funding. The holy grail for all tech start-ups the world over. Whether it’s the bubble of an incubator, bootstrapping, or angel investment, all tech start-ups need money and resources to survive. Having the idea and the passion is one thing, but cold, hard cash is another. It remains the almost literal lifeblood for the smallest basement project to Silicon Valley pioneers and everything in-between.
But small business funding doesn’t come cheap, and in fact, it comes with its own myriad of factors to consider.
In this article we’ll take a brief look at some funding options for tech start-ups in 2016. There are many funding methods out there, some good and some not so much; from attracting an angel investor (good) to maxing out your personal credit card (not so much). Here we will focus on the good, and remember that one size does not fit all, there is nothing stopping you from consolidating a combination of funding options.
Doing it Solo
“Stay self-funded as long as possible.” -Garrett Camp, founder of Expa, Uber and StumbleUpon. This is the dream of every founder and might require taking out a small business loan. It brings immense risk, but with hard work and more than a little good luck and belt-tightening, it might just pay off.
Remember that staying self-funded has several important perks; the most being 100% ownership – no equity at all to be given away to investors. And if you want to look for funding in the future, you’ll be able to show investors that you’re a successful tech start-up on your own merit.
The Power of the Crowd
It goes without saying that the Internet has changed the way we go about our lives, both personally and professionally. It has opened up several new and exciting avenues for generating cash, and crowdfunding is a big part of that revolution.
There are a myriad of platforms out there to help you raise money from dozens, if not thousands of investors. Whether you’re using Kickstarter or Indiegogo, you’ll be able to call on the trust and interest of others to see your dreams come alive. And, if one takes this concept back to its root, there is the option of asking friends and family to help cover costs in return for certain rewards or returns. But remember that even though it might seem like money is falling from the tree, you’ll still have to honour the promises made.
The real-world equivalent to Dragons’ Den, angel investors are on a mission to find the next brilliant idea, but they’re not simply investing their money in tech start-ups out of the kindness of their hearts. In return for funding, you’ll be asked for a sizable percentage of your company.
Angel investors don’t just throw around money either – they will want to see solid proof of return of investment. This includes market growth, your consumer audience, and above all, a truly unique selling point.
These are the basic tiers of funding available to the average entrepreneur. A fundamental understanding is a good place to start, although it’s often most beneficial to seek guidance from professionals in this area. A good place to start would be to find a reputable online accountant in the uk who understands the financial landscape to show you the ropes. Time is money and their knowledge can save on both.