The path to building a successful business can get muddied as you see your startup grow. Whether you’re hoping to add to your team, launch a product into the world, or scale your business, there are numerous funding options available to you.
Some options dilute your ownership, and some don’t. But there are strategic reasons to look at each, depending on your situation. Read on for a guide to navigating the funding landscape, and talk to one of our business advisors when you’re ready to take a deeper dive.
There are many government grants available to incentivize innovators and entrepreneurs to find solutions to some of our world’s greatest challenges. Though the rigidity of grant applications may seem prohibitive, you get to maintain control of your company and don’t have to worry about outstanding debts. Government-endorsed organizations like the Regional Innovation Centre (RIC) network can assist you in selecting grants, reviewing grants, and in some instances, endorsing you when required. We’ll always advise you to have a contingency plan, though, as this method can be competitive. Should you succeed, there may also be a lag between the time you send in your application and when you obtain funding.
Consider this method if: Your business is incorporated, and you have some time to spend crafting and editing applications. New grants surface regularly, so keep an eye out for opportunities relevant to your business.
Where to look: The Government of Canada’s Innovation Canada initiative provides a great tool to locate funding opportunities, in addition to other resources, that are relevant to your industry. Or talk to your TechAlliance advisor.
This is one of many ways to find non-dilutive funding, but if you’re looking for more direction, we always recommend speaking with a business advisor directly.
Not to be confused with venture capital firms, which generally come later on in a company’s growth trajectory, an angel investor is an individual who invests their own money into a business in exchange for equity. They exist privately, as well as within formalized groups. Many Angels invest within the industries with which they’re most familiar, as entrepreneurs or industry professionals, and with that experience they can bring tremendous value to an early-stage company as a mentor.
As an entrepreneur, you’ll need to determine if you need a strategic investor who can open doors and provide mentorship, a passive investor looking for a return on their investment, or a mix of both. Make sure you’re comfortable with who you’re asking to invest; they will own part of your company after it’s all said and done. The earlier your business is, the more risk the investor takes on in investing in you, so approach this option when you know your business is ready.
Consider this method if: Your startup has impressive growth potential, a compelling value proposition, and traction (ie: user growth, sales revenue, impressive team roster etc.). Bear in mind that you’re expanding your team with a new shareholder, and giving up some ownership.
Where to look: Did you know that Southwestern Ontario is home to SWO Angels, situated within Canada’s second-largest angel network, Equation Angels? The opportunities to connect even span to the west coast; Valhalla Angels is one of the most active Angel networks in the country. TechAlliance also hosts the London, Ontario chapter of Keiretsu Forum, the largest global angel investment network, on a monthly basis. Members of all these groups regularly provide their time as mentors, intimate access through panel discussions and fireside chats, and attend TechAlliance’s bi-annual demo day. Gain a better understanding of how to prepare your startup for a funding conversation.
The term ‘debt’ gets a bad rap, but if done with a plan, debt financing can be a helpful step to pad your startup with the capital you need to grow. You won’t have to give up any equity to outside investors, but you also risk losing the expertise and support they bring with the deal. Unlike grants, though, the use of this funding is generally not restricted.
Consider this method if: Your business is incorporated, you have a business plan, and your personal credit will allow for it. For early-stage startups, be intentional about the use of these funds—rule of thumb is that they should be tied to revenue in some capacity. Know how the loan plays into acquiring revenue or new customers.
Where to look: Futurpreneur provides seed funding for youth-led ventures, while social entrepreneurs can make connections with impact investors through VERGE Capital. Most banks can provide small business loans to qualifying companies. TechAlliance has connections to great credit unions and banks specifically focused on funding entrepreneurs.
Rally the supporters you never knew you had and let the crowd decide if they’ll back you. With this rewards-based method, you’ll be able to validate your idea and gauge the demand for your product or service, while simultaneously funding your business. Exercise caution if you’re trying to protect your IP or first-mover advantage in your space.
Consider this method if: You have a great B2C product and a strong marketing strategy. Storytelling will be an important differentiator now that the cat’s out of the bag. Well-thought out incentives for campaign contributions will attract attention, as your backers will likely want something for their investment.
Where to look: Kickstarter, Indiegogo and Patreon are some of the most popular websites for crowdfunding. They each play host to consumers looking to stay ahead of the curve and get first-grab at new products.
Friends + Family
You don’t have to look externally for support! Calling on friends and family to invest in your venture will likely result in a smaller, “pre-seed” round, involving equity or debt. Make sure that you do your due diligence and detail any equity transactions in a formalized agreement and a clean “cap table”, formally known as a “capitalization table”, which contains information on every investor with an equity stake is represented, the round they invested in, and type of share they hold. Follow-on investors will appreciate this. Don’t underestimate the power of a strategy when it comes to leveraging this money, and identifying where your gaps are. There should still be an expectation for return on these investments, but it’s easier and quicker to deal with your network than it is to rally resources from external sources.
Consider this method if: Time is of the essence and you have a healthy network of people who believe in your passion and capabilities. Don’t skimp—get a lawyer involved and put appropriate terms in place. Make sure everybody feels protected. It’s still a business interaction, after all.
Let’s take it back to basics. Money is the lifeblood of any business, and as an early-stage entrepreneur, it’s likely a scarce resource. Because of this, money management is crucial. Staying “as lean as you can for as long as you can” in the short-term could set you up for success long-term. Bootstrapping also helps to clarify some necessary pieces of the startup journey before diving into potential high-risk agreements. As a bonus, going into a future investment meeting having generated revenue is attractive to third parties looking to provide funding, like banks and investors.
More than anything, it’s about taking the time to know where your resources are. Not sure where to start on the path to your growth? Our Business Services team is ready for a chat.