If you have ambitions to launch your own successful tech startup, then funding your venture should be on the top of your list of priorities. The tech startup industry is intensely competitive, meaning that obtaining the funds you need to realize your dreams can be a challenge.
That’s why it is important to be aware of the most sensible and realistic funding options that put your startup on sound financial funding from the get-go. Read this guide to find out the smartest and most realistic ways to fund a tech startup in 2020.
Angel Investors
This is one of the most popular routes for tech startup founders who are seeking seed funding. Essentially, an angel investor is an individual or private entity that is willing to fund promising startups in exchange for equity ownership in your business. Typically, an angel investor is best described as any investor that is willing to give around $25,000 to $100,000 in immediate funding, but that figure can easily reach the millions when it comes to high-profile angels. Just make sure you have a pitch-deck and growth plan in place before you approach an angel.
Bootstrapping
In the tech startup community, bootstrapping is a term used to describe a situation where founders fund their startup from their own personal funds. This can be done with savings or with personal lines of credit provided by an individual’s bank. One of the most popular forms of bootstrapping is remortgaging, which is when an individual releases capital by remortgaging their home. User-friendly tech platforms such as Trussle offer free remortgaging comparison services to anyone who wishes to go down this route, so this form of financing has never been easier to access.
Crowdfunding
Many people assume that crowdfunding is limited to asking strangers on the internet for funds to launch a business. However, the crowdfunding industry is a sophisticated, $300 billion a year behemoth that provides financing for thousands of tech startups around the world every single year. There are several different forms of crowdfunding that founders can pursue.
Platforms such as Kickstarter offer rewards-based crowdfunding, in which people who donate funds to your business can access rewards such as free products or services in exchange for their cash. There are also platforms that offer equity-based crowdfunding, in which donors receive partial ownership of your tech startup.
Startup Accelerators
Once a relatively niche concept, startup accelerators now exist in virtually every city where there is a lively startup community. They are mostly focused on tech businesses and operate as development centers where industry experts offer financing, mentorship, and resources to startups that are perceived as the most promising. Any founder can apply to join a startup accelerator, and the rewards for successfully joining can be substantial and relatively low risk.
Government-Backed Financing
Finally, you have the option to seek government funding for your startup. Many governments around the world have their own initiatives for promoting the growth of startups that are largely motivated by the belief that doing so will create jobs and provide tax revenue.
In the US, tech startup founders can approach the Small Business Administration for low-interest loans or free grants to fund their business. In the UK, founders can apply for a Start-Up Loan, in which the government offers low-interest loans of between £500 and £25,000, as well as 12 months of free mentoring, for any startup that successfully applies.
These are the most straightforward and low-risk ways to fund your tech startup in 2020. Whichever route you choose, always make sure that you have a comprehensive business plan before you apply.
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