In the best of times, funding can fuel a startup’s growth, increase employee counts and boost productivity. But in the worst of times, when money is tight and uncertain, a lack of funding can fuel a founder’s anxiety. Not knowing when your next investment round will close, or if you have enough runway to make payroll in the coming months are very real and quite stressful realities for many startups.
But, if you are determined and ready to put in the necessary work to secure funding for your company, there are a number of ways to do so. Depending on factors, such as your business model and market size, some funding options may be better suited for your company than others. Remember, a little bit of work now can make a big difference in the long run. Whether you’re looking for early stage funding to help you get started, or financing to support you as you grow, these are some great sources of capital for your company:
Competitions that offer cash prizes are a great source of funding for startups, as they rarely require you to give away equity. From pitch and business case competitions to hackathons and design jams, there are a variety of ways to compete for cash for your business.
If you’re planning to apply or register for a competition to help fund your company, make sure you go into it with a plan in place. It’s important to remember, there is value in participating even if you don’t win. As long as you leverage the opportunity, you can walk away with an expanded network, a more developed skill set, and boosted brand awareness.
You want to have a solid understanding of the competition’s audience ahead of time. Research the organization that is hosting the event and try to find out who the judges are. It’s also a great idea to connect with other participants either in person, at the competition or online throughout the experience. Even though you are competitors, you can learn a lot and maximize the opportunity if you’re among peers.
While competitions may seem like “free money”, it’s important to keep in mind that they do require you to invest some time into preparing and participating if you want to make the most of it.
If you’re looking for another way to fund your business without exchanging equity, grants can provide the financial boost you need to grow your business. Grant availability varies depending on your industry or company’s stage, for example. When researching grants, check out government organizations and programs that provide funding to businesses. Many community groups also offer grant-based funding to new and growing businesses. Connect with your local business community and learn about the various organizations that provide financial support to see if there are any grants that are applicable.
Similar to competitions, grant applications take time to complete. The process of applying can also be tough to navigate. You may need to schedule a meeting (or several) with the organization that is offering the grant prior to submitting your application.
While grants are a great source of funding for your business, avoid relying on them to keep your company afloat. The money may not come when you need it most; approval processes can often take time and a positive outcome is never certain, even if your application is flawless.
If you need funding and you don’t have time to spend participating in competitions or applying to grants, a loan might be a good idea for you. Like all debt, you should carefully consider if your company is in a good position to take on a loan.
Once you’ve decided that you are ready to apply for a business loan, set up a meeting with a local bank (or schedule a time during our banking office hours as a Volta Network Member), and learn about the business loans they offer. You can also reach out to business support organizations and community groups that offer loans to entrepreneurs. Be sure to compare the terms and determine which loan is the best fit.
If your business is on a venture path – meaning the addressable market is large enough that investors could receive at least a 10x return on their investment – you’ll want to consider how you will secure venture capital sooner than later.
Even if your company is in the early stages and you’re not looking for capital at the moment, you should start to develop relationships with venture capitalists (VCs) now so that when it’s time to ask for investment, they are already familiar with you and your company’s story.
VCs typically invest in specific sectors or in certain types of companies, so it’s important to determine if the investor you are pursuing is the right fit. Look at the portfolio of companies they’ve invested in and see if there are any similarities. Are they all SaaS startups, or do they all operate in the medtech sector? If you don’t see at least one commonality between you and their portfolio companies, the VC may not be the right investor for your business. If that’s the case, keep researching VCs until you find one that you’re confident you’ll connect with.
It is important to note VCs receive hundreds of pitches from innovative founders just like you all of the time. If you want to stand out, it’s best to find a mutual connection who is willing to vouch for you and your business, then ask them to make an introduction. A VC is more likely to meet if someone they know and trust says they should.
If you’re not quite ready for venture capital, angel investors may be a great alternative for you. Angels are different from VCs because they use their own money, as opposed to investing on behalf of a fund, and typically invest smaller amounts in companies at earlier stages.
Angels are usually successful business people and can add significant value beyond investment dollars. Often, this takes the form of guidance and introductions to key stakeholders.
Just like you would with VCs, it’s important to start connecting with angel investors as soon as you can. For tips on how to develop relationships with angel investors, check out our blog about our Women Taking over the World with Tech event recap that followed Dawn Umlah’s angel investing workshop.
Side hustles and part time jobs
It may not be financially feasible to dive into entrepreneurship full-time in the early days of developing your company. Many founders work at various side hustles or at part-time jobs to fund their businesses – and pay the bills.
Whether it’s contract work or a consulting business, it’s never a bad idea to put your skills to use while earning cash to invest in your venture. When starting a side hustle or applying for jobs, make sure you have an up-to-date professional portfolio and social presence to ensure you leave a positive first impression. If you work in tech and you’re having trouble deciding what type of side hustle to start, read our blog for some inspiration.
However you decide to fund your venture, it’s important to do your research and really understand both sides of any financial agreement you enter. Money is great and a critical resource for running a successful business, but always keep in mind that there should always be a mutual benefit to your company and the organization or person providing the funds.