Funding your startup
If you have a great idea for a mobile app or a revolutionary piece of software, but don’t have the funds to develop it, don’t fret! Luckily, there are many ways to get funding for your startup. You can find different options depending on your project and your particular situation and we’re sure you’ll be able to find the perfect fit for your project somewhere below.
Although crowdfunding has been around in one form or another for a very long time, it really took off with the arrival of the internet. Today, it is a very common way to raise money for all kinds of causes or projects and there are dozens of sites devoted to crowdfunding.
How does it work? Well, you start by detailing your idea and how much money you need on a crowdfunding platform, like Kickstarter or Indiegogo. People can then give different amounts of money to your development startup in exchange for access to the product you’re raising money to produce. You can also add extra bonuses for those people that make more considerable pledges.
Crowdfunding is very attractive as it doesn’t come with interest rates like a loan would. It also helps you make sure there is an actual market for your product before developing it. However, there is also a downside. There are a lot of companies trying to get funds this way and it can be very competitive. Not only will your idea need to be innovative; you will also need to invest time promoting it and growing a social media presence in order to succeed.
2. Incubators and accelerators for startups
Accelerator and incubator programs are excellent resources to help development startups meet their goals and establish a powerful network. While an incubator helps emerging startups take their first steps and build their companies, an accelerator helps existing startups grow. Both programs are a short-term boost for your project. They usually last 4 to 8 months and require your full commitment during that time.
There are countless incubators and accelerators all over the country ready to lend you a hand. You will need to take time to do your research to see which one is the right fit, as well as prepare an appropriate pitch to earn a spot in one of them. You can take a look at our article about accelerators in San Francisco to help you get started.
3. Angel investment
Angel investors are people who have the resources to fund a project and are interested in investing in up-and-coming startups. In addition to funding, they may also offer mentoring as they are usually current or former entrepreneurs themselves. Both Google and Yahoo started out this way.
In exchange for their money, angel investors will ask you either for an equity share or convertible debt. However, their goal is usually not just to make money out of your business; Angel investors are more likely to support projects they believe in. Therefore, you will need to choose your angel investor prospects carefully, have a sturdy business plan and be good at pitching your idea.
4. Venture capital
Venture capitals firms professionally manage funds to be invested in companies with considerable potential in exchange for an equity share. Venture capital firms usually aim at projects with a relatively short-term return on their investment (usually three to five years). This makes them a great fit for the fast-paced tech industry but also means they are more likely to go for a company that is slightly past the startup stage.
Moreover, going for venture capital means you will most likely have to compromise with your investors on various issues, so if want to maintain full autonomy over your project, this might not be the best option for you.
5. Government programs and grants
A lot of countries have programs aimed to fund development startups and new businesses in specific industries. The US is no different and offers several opportunities for startups to get off the ground, such as the Small Business Technology Transfer (STTR) program.
Just like with incubators and accelerators, you will need to do your research to find the best option and present a well thought out plan. These programs are even more competitive than crowdfunding and can be a long shot if you are not the right fit. However, if you meet the criteria, they can be a great option to get started.
6. Funding your startup with a loan
In the more traditional side of things, getting a loan is also an option. Just like with angel investors and venture capital, you will have to properly pitch your project. However, whether you are asking money from a bank or a friend or family member, these people may not be acquainted with the tech industry. Therefore, you will need to adapt your sales pitch to your audience to increase your chances of success.
7. Local competitions
Another funding option is to turn to local competitions. The key in this case is to make your project stand out. This way, even if you don’t win the competition, there are still several benefits. You get a chance to practice your pitch and improve on it for potential investors and you may gain some media coverage that could be useful to get funding elsewhere. Requirements and prize money for startup competitions are quite varied; you can take a look at some of them here.
Funding your startup final thoughts
As you can see, there are plenty of options when it comes to funding a development startup. The one thing they all have in common is that preparation and research are essential. A sound business plan and a polished elevator pitch can get you a long way, but you will also need to look into the benefits and implications of each option.
As a parting note, remember that the search for funding can be very competitive so don’t get discouraged by rejection. Just keep trying until you find the perfect funding option for your startup.