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How to Attract Funding to Your Tech Startup

How to Attract Funding to Your Tech Startup

You have a great business idea and you’re sure that it can succeed amazingly. You probably see yourself standing next to renowned business owners like Jeff Bezos, Elon Musk, Bill Gates, Sara Blakely and more, while offering insights into your fantastic business that started with only your idea. But that won’t be enough to reach the top shelf, you will have to believe in your idea so much that you’ll turn everyone you meet into believers. Other than that, if you really want to build a successful startup, getting your new venture off the ground needs capital and we’ll teach you everything you need to know in this blog article.

Wondering where will all that money come from to support your startup?

The idea of raising funds through venture capital, angel investors, and startup incubators is very famous in the tech industry and surely fuels the business growth, driving it to success. But we have great news for you: there are more funding options accessible to you too and we’ll make your reading worth it.

You can choose any path you like and you’ll still need all the help you can get. So prepare to learn everything you’ll need to get your business funded and 7 ways to attract the money needed. 

1. CREATE YOUR BUSINESS PLAN

Start by creating your business plan that helps you organize step by step, with goals in your mind, how to achieve them and strategies to follow in this new venture. All your potential investors, lenders or bankers will be interested in reviewing your business plan to validate your idea, so it’s essential to do it right because this is how they decide to fund your startup or not. 

These are the details to include in the business plan: 

  • Market research
  • Spending costs
  • Annual revenue
  • Funding needs
  • Financial projections for the next five years

All of these will prove the business potential to the investors. The business plan also helps you determine the amount needed to raise for your startup.

The money needed to create the business itself or the product won’t be enough, there will be additional expenses like registration fees, business licensing, marketing, payroll and more. 

2. DECIDE HOW YOU’LL RAISE THE MONEY

At this moment, you should know the funding value needed by your startup and focus on where to get the money from. Your type of business determines the combination of fundraising methods, based on your startup’s precise needs and goals.

You might need a significant amount of startup funding for your business idea and if you aren’t willing to give a percentage of ownership in your company to obtain it, you should avoid pitching investors. Focus on business loans instead, try applying to lines of credit or grants.

If you realize that your business idea really needs a small amount of money to get started, the venture can be funded with personal savings or money loaned from friends and family. 

Do your research before choosing your route! If borrowing money is the best solution you can find, your business plan should include a repayment plan of the money loaned.

3. EXECUTE YOUR FUNDRAISING PLAN BY COLLECTING WHAT YOU NEED 

It’s time to put together the information & legal documents you’ll need, once you’ve decided on the method of raising capital.

If your plan is to apply for grants or business loans, learn what each organization will require from you in their application resources. If your plan is to find an investor, concentrate on building a powerful business plan, a strong pitch, and a convincing pitch deck.

The pitch must be delivered with the highest confidence possible, so make sure that you practice it before the presentation. The investors might ask you questions so prepare smart answers ahead and be ready to respond confidently, while successfully delivering your pitch presentation.

If you’re an aspiring entrepreneur, practice putting yourself in the shoes of your audience. This will help you understand what level of knowledge they have of your industry and you’ll be able to easily build the pitch around that.

Fundraising can be difficult in the tech industry because the average investor or consumer lacks a full understanding of the industry. Keeping a simple language for your presentation, easy to decode by anyone in the audience, is important. Even non-tech consumers should understand the benefits of funding your company.

How to Raise Funds for Your Business in 7 Ways

1. REACH OUT TO INVESTORS FOR VENTURE CAPITAL

The investors you’ll be searching through this method are the Venture capitalists (VCs). Venture capital firms can provide not only funds but also their connections, knowledge and resources needed for a healthy exponential growth of your new company. So pay attention to finding this type of investors that can bring added value to your idea. 

Most of the VC firms are looking for high-growth companies, frequently in the tech sector, that have a proven track record of success. They’ll expect you to give up a percentage of business ownership in exchange for their funds and expertise, or perhaps the very least could be a seat on the board of directors in your startup.

Many entrepreneurs searching for funding from VCs and venture capital firms are willing to make this trade. This determines a tough competition between business owners to connect with professional investors.

Try to search for funding from a VC firm that invests in startup businesses often, sharing the same industry, values or mission that you have. If your startup focuses on “cleantech” green energy, reach out to firms like Energy Impact Partners or Energy Foundry. If your startup is in the games industry, reach out to players like Galaxy Interactive or Griffin Gaming Partners, expertised in your domain.

2. JOIN PITCH OR BUSINESS PLAN COMPETITIONS

Submitting your business plan or pitch idea to these competitions helps you get valuable feedback in return, be heard and get seen. You can also win cash prizes that will serve as startup funding, find resources for your venture and drive attention from the media.

The non-tech startups can also join these competitions, even though many competitors will pitch about buzzy tech business ideas. Socially-minded entrepreneurs are interesting players for competitions like Red Bull Basement.

Back in May 2017, when the event was known as Red Bull Launchpad, Park & Diamond, who created foldable bike helmets prototypes, received top honors at this event. This achievement helped Park & Diamond showcase their innovative product to a bigger audience at the TechCrunch Disrupt conference in New York.

Your local Chamber of Commerce or Small Business Administration (SBA) office might often host these types of events at a smaller scale to encourage local businesses. Here you’ll find less competition, so we advise you to try.

3. JOIN A STARTUP ACCELERATOR OR INCUBATOR

These organizations are created with the purpose to help small businesses and their founders implement their ideas to reach the next level. 

Accelerators & Incubators help startups & businesses at different stages of growth:

  • Businesses that already have an idea and a business model created can find support in Accelerators to connect with partners, investors or to find resources that fuel growth.
  • New founders and startups with great ideas can find support in Incubators, even if they don’t have a business model or plan created yet, because they still need to connect these dots

Expect to receive access to mentorship, connections, and resource opportunities you wouldn’t get otherwise.

4. ROLL A CROWDFUNDING CAMPAIGN 

Crowdfunding websites like Indiegogo and Kickstarter help businesses raise money from a group of people that believe in the main idea, attracting a large number of investors at a time. Crowdfunders will donate money to your campaign, helping you achieve your financial goal and will only expect a gift in return.

The idea of a gift can be translated as a discount on a future purchase of your product or service. You can also give your crowdfunders the finished product or service itself as a gift, if that is something you can afford doing. Just remember to always be creative with everything that you do. Another gift idea could be meeting the business owner in flesh, or uploading a list on your website with the names of the main crowdfunders who invested large amounts of money through your campaign.  

There are also equity crowdfunding platforms like truCrowd, StartEngine and SeedInvest who offer the opportunity to crowdfund an investment round. This type of campaign usually attracts potential customers who would really buy the service or product, bringing a lot of customer insights from the crowdfund investors. 

If this method of funding your business excites you, make sure your campaigns are compliant with federal laws before launching them.

5. GET A BUSINESS LOAN OR A CREDIT CARD

The more conventional business funding methods, like a bank loan or a credit card can come in hand when needed as well.

As a startup, it won’t be easy to get a traditional business loan, so keep in mind that SBAs offer microloans and many loan programs customized for new aspiring businesses. Most of the lenders find new businesses risky, so the SBA offers a warranty, backing up loans through certain lenders. In this way, banks offer loans to new borrowers much easier.

Your credit history might come in handy if it’s a good one, so applying for a business credit card might just do the trick. While you do that, get informed well and take advantage of the additional benefits provided by some issuers. If you developed a plan on how to use the credit card and a plan to repay the debt, it’s ok to use this method, so don’t be afraid.

Enjoy the head start but always control your spending, don’t drown your business in interest payments. If you plan on using credit cards for funding, think of additional ways to get financial support that can be helpful when times are rough.

6. REACH OUT TO SMALL BUSINESS GRANTS

Some grants are specially designed for small businesses, and there are bigger chances to obtain them if your startup does important work in fields like education, medicine, and social welfare.

The vast majority of these grants are given with little to no strings attached, so expect a time consuming application process and a tough competition ahead. If you’re lucky enough to get awarded with a grant, there’s no need to pay interest on the funds you receive or give out equity because this is a free startup funding for small business. This still does a great good to the economy of a city, offering jobs and receiving taxes from the products or services bought by consumers. 

There are thousands of different grant programs, so if you think that your business idea fits, just go for it!

7. REBOOT YOUR BUSINESS

In the very early stages of the venture or at some point in the lifetime of a company, lots of startup founders will have to self fund them.

This method will always help you keep the entire company’s ownership and reinvest the money spent on interest rates or fees instead. So here you have this important advantage for choosing this path. Of course there is also a downside if the business fails: losing your personal funds invested in it.

We advise you to infuse some of your personal assets or resources to your startup, even if you plan on reaching out to other funding methods in the future. 

Applying for SBA loans will determine them to check if you’ve exhausted all other avenues before reaching out to this method. Investors will want to see you have some skin in the game before agreeing to invest in your business. If you’re willing to invest in your own company’s success, you’ll determine others to follow your example after you share your motivation. 

VCs reject lots of great ideas and products that could become successful businesses because the founders come to ask for investment too early. Building a minimum viable product (MVP) funded with your personal savings before asking for investments could be the greatest advice for a business to succeed. 

You have to know that VCs don’t search for perfectionism in MVPs, but rather for the ability to pivot your business in the right direction, after you take part in developing the MVP and discovering at least one error or mistake.

Rebooting forces you to be strategic & creative and use the offerings and funds more wisely. This will determine you to build a stronger business and a better product before reaching out to other funding sources. 

Your Startup Business Funding is Controlled by You

As you can see, there really are no shortcuts when it comes to startup funding for your business venture. Even the opportunities that promise “free money” come with significant effort and preparation on your part.

Angel investors, seed funding, venture capitalists…it can all be a bit much to digest, but startup funding, even small investments, can really help cash flow and get your startup business off the ground.

The road to success as a startup founder may be a long one, but if you’re willing to roll up your sleeves and get to work, it’ll be a rewarding one too.

Contact us to find out more about what we do and how we can help you!