9 Realistic Ways to fund your tech project
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What is holding you back from your entrepreneurial dreams? Money or ideas? Ever wanted to start an entrepreneurship adventure but got blocked by the lack of finances? Thinking business builds wings but technically speaking your pockets can not only hold you back but also demolish an entire innovative idea: Unfortunately, Money is the bloodline of any business.
When it comes to tech-based businesses such as mobile app development, websites, or systems,..etc, money is what you put first to even get a project onboarding of the development process and so entrepreneurs think: How do I fund my startup?
This blog presents the most efficient and realistic ways to potentially finance your idea:
Bootstrapping
The word bootstrapping might not excite you the most but it is the very first alternative and the healthiest way you should think of. Bootstrapping refers to self-funding your tech business without requiring external methods at least at an initial operating level when you are just starting your business. Self-funding doesn’t necessarily mean investing your personal money; it can include contributions of family and friends who won’t require many formalities or compliances and wouldn’t impose much-bothering interest rates.
You shouldn’t be scared to invest your own savings at the initial stages when you don’t have enough success to drive other initiatives as the potential success of your first steps will help you get access to bigger options when investors consider you. Bootstrapping also spears you the responsibility to pay people who owe you money in case of failure.
Crowdfunding
If bootstrapping feels heavy on you, you can still achieve the same advantages by opting for crowdfunding. Crowdfunding has become a very popular option lately: It’s like taking a loan, pre-order, contribution, or investments from more than one person at the same time. In crowdfunding, Anyone can contribute with money toward helping a business that they really believe in.
There are multiple platforms online that do offer crowdfunding options and this how it works
- The entrepreneur will post his business/idea on a crowdfunding platform.
- Then detailly mention his goals in terms of numbers and time scope.
- Averagely post estimation of how much funds are needed.
- And then consumers can read about the business and invest freely the amounts they feel suitable
- Those giving money will make online pledges with the promise of pre-buying the product or giving a donation. Anyone can contribute money toward helping a business that they really believe in.
Opting for crowdfunding for a tech business is very recommended for the numerous advantages it holds such as:
- Increases popularity of the product
- Serves as a marketing channel
- Enhances user trust in the project
- Creates immediate demand for the product
- Can attract venture-capital investment
The only disadvantage I can see in crowdfunding is that it can take longer to gather funds as it presents a very competitive environment and there is a risk of overexposing your idea to “project idea theft”.
With our 22 years of experience as an offshore software development company, we came across numerous fantastic digital solutions built with crowdfunding facilities. Some of the main platforms we heard our clients talk about are: Indiegogo, RocketHub, DreamFunded, etc…
Approach Angel Investors
Angel investors are individuals with surplus cash and a keen interest to invest in upcoming startups or a group of people or a network actively analyzing proposals of entrepreneurs; some networks even offer mentorship and guidance alongside providing capital.
Did you know that Google, yahoo, and Alibaba are the fruits of angel investments?? The whole world should be grateful!
It is a practice that generally occurs in a company’s early stages of growth but generally offers smaller amounts than other options.
If you are looking to wing your costly digital project (such as on-demand apps or IoT-based franchises, etc…) you can approach angel investors like Indian Angel Network.
Approach Business Incubators & Accelerators
Incubator and Accelerator programs do fund hundreds of startups every year and some of them do offer very interesting amounts that would not only help develop the digital solution but ensure its continuity and progressive maintenance. Dropbox and Airbnb are here easing our lives thanks to one of those programs:
- Incubator programs do parent the project and nurture its needs from space for activity, tools to training and network
- Accelerator programs do help the business run smoother and take a giant step towards establishing their service/ product
Both programs do offer the opportunity to establish great connections with experienced business owners, mentors, free investors, and fellow startups.
Win a tech/ startup/ hackathon competition
This one might be easier said than done! But taking the brave initiative of participating in a hackathon itself is highly beneficial for your business reputation and marketing to maximize its opportunities of fundraising, growth, and prosperity and also getting some media coverage. Winning the competition is a whole other level of proving to yourself that your idea is worth it and that profits are coming.
To compete in such initiatives you need to have a proper idea, a clear business plan but above all a huge pitching ability to convince judges of the worth of your project. Personally, my team and I benefited from winning the “best idea” title at IndiaNIC infotech limited hackathon and it was one of the most fruitful experiences of our life.
You need to make your project stand out in order to improve your success in these contests. You can either present your idea in person or pitch it through a business plan. It should be comprehensive enough to convince anyone that your idea is worth investing in.
Government Programs
Depending on where are you willing to start your business, many governments around the world do encourage tech ideas and do offer huge amounts of funds to help those ideas turn into businesses and contribute to the national economy.
In most cases, the process is kinda long and you are required to conduct very deep market research, submit your business plan and wait for If you comply with the eligibility criteria, the Government grants as a funding option could be one of the best. You just need to make yourself aware of the various Government initiatives.
Product pre-sales
Very common around complex digital systems, such as Design systems and complex software, pre-sales is a highly effective way to raise the money needed for financing your business. For example, Apple and Samsung launch pre-order campaigns way before the official launch, and even the mid-development process
Venture capital
Venture capitals are funds meant to be invested in potential successful business ideas. Although They usually invest in ideas that are already beyond the planning phase and start generating ideas against equity and do look for an initial public offering (IPO) or an acquisition of the idea, VCs do guarantee the scalability and sustainability of the business. Fast-growth companies like Flipkart, Uber, etc benefited tens of millions of dollars that can be used to invest, network, and grow their company quickly.
The disadvantage though is that VCs might be offering a lifetime opportunity but they do also look to cover up their investment quickly from 3 to 5 years so if you see your idea might need a longer period then that venture capital might not be suitable for you.
Bank loans
You might be thinking that a bank is the first destination that entrepreneurs look up to but you are WRONG. Bank loans should be your last option!
Bank loans are a legitimate way to get money fast and stably to fund your idea. Banks to offer two types of loans for a business idea:
- Working capital loan is a loan required to run a first complete cycle of revenue-generating operations whose limit is fixed with hypothecating stocks and debtors.
- Funding loan is a long process that involves full preparation of documents, plans, project report, etc
The advantage of benefiting from periods of exoneration and long term repayment modality but that comes at very high-interest percentages
Many entrepreneurs refuse to look for loans for many reasons including religious reasons as some religions ban the use of loans.
When you have decided on taking a loan yet you are not eligible for a bank loan or you got rejected you can opt for microfinance providers with reasonable credit ratings
What’s next?
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