Founding a Tech Startup – Where is the Money Coming From?

You need a few basic things in order to found a tech startup. You need a killer idea that will make everyone else slap their foreheads; you need a business plan that will ensure your idea is realized; you need a place you can work from; you perhaps need a few people to help you put it all together. Another thing you need in order to found a tech startup is money. It would be perfect if this was not the case, but it is.

Starting a business of any kind requires money and unless you have a ton of money scrounged up someplace or a rich aunt who loves you very much, you will need to find a way to make it appear from thin air. So, what are your options?

Take out a Loan

One of the more traditional and straight-forward ways to find the money to found your tech startup is to take out a loan. Small business loans are traditionally offered by various banks which have also started to offer loans more tailored to the needs of startups. In many countries, governments often offer grants which come with lower or even no interests. Of course, if you choose to go with something like this, you need to be careful not to borrow more than you can afford and also that you will be able to repay these loans in the future.

Pitch to Investors

If you have a truly great idea and a sound business plan, you can always approach different kinds of investors who might be interested in putting their money into something that might succeed. These can be traditional investors looking for a share in your future company or they can be local angel-investor groups which are often more pleasant to work with and more generous when it comes to what they want back from you. You need to be extra careful when approaching investors so that you do not end up handing over too much power to them. Of course, you always have your friends and family members who might be interested in investing in your new tech startup.

Consider Crowdfunding

If you are looking for a more contemporary startup-funding concept, look no further than crowdfunding. With crowdfunding, you outreach to regular people instead of professional investors with your idea that they can then choose to fund by giving a donation. You will need to offer something in return, usually something of token value. Kickstarter and Crowdfunder are the most popular examples of crowdfunding platforms, the latter of which also offers equity crowdfunding for serious investors. Before you decide to do this, you have to make sure that your business is suitable for crowdfunding.

Negotiate an Advance

If you already have an interested customer, preferably a major one which recognizes what you are trying to do and which is looking forward to becoming your customer/partner in the future, you might want to try and negotiate an advance on their future payments. With this kind of advance, you will be able to see your tech startup come to life and pursue that relationship in a manner that will benefit both sides. If the situation is suitable, there is also the option of producing a white label product for your benefactor.

Research Local Startup Incubators

Startup incubators and accelerators are organizations which are usually associated with various community development organizations, major universities and certain major companies and which provide a plethora of free resources for budding startups. These can include consulting services and office facilities while many of them also provide seed funding, which is what we are interested in today.

Sell your Assets

This can be a real gamble, but there have been cases in which startup founders managed to come up with the money by selling off their assets. Of course, this will work only if you have something valuable to sell, such as a car or a collection of some sort. Once the startup is on its feet and making money, you can always buy back your valuables. Even if you end up spending more than you earned when selling, it will be worth it. You were never doing it for profit.

Whichever method you decide on to fund your tech startup, you need to be careful. Before you do anything, put everything down on paper and make sure that it makes sense for you. There is no point in raising money for your startup, only to find out that this will only cause troubles down the road.

AUTHOR: During his time in the trade show industry, James D. Burbank has witnessed numerous tech startups struggling to find the money needed for the launching and the first few months. He is the editor-in-chief of BizzMarkBlog.