3 Funding Sources to Get Your Tech Startup off the Ground
The oft-repeated "90 percent of tech startups fail" statisticâ€”first put into circulation by the Dallas-based law firm Allmand Lawâ€”has more to do with poor business planning than it does with access to adequate funding. Airtime, a video chat platform created by Napster founders Sean Parker and Sean Fanning, was supposed to be a revolutionary new way for people with similar interests to meet one another via video chat. Despite $33.5 million in funding, users had concerns about privacy and didn't understand what value Airtime provided. It never became profitable, and as Wired reports, it is now officially a failure. The money for your startup venture is out there, if you're willing to explore both traditional and unorthodox sources. Here are three tips to secure the funding you need.
Explore Specialized Private Funds
It's becoming fairly common for large corporations and independently wealthy individuals to utilize their own capital to fund startups that fall under specific categories. Siemens, the international electronics and engineering giant, recently launched Siemens Venture Capital. The $100 million fund is primarily focused on energy and health care-related startups that are based outside the U.S.
Paul Singh, a former partner at business accelerator and seed funding outfit 500 Startups, recently launched his own startup fund called Crystal Tech Fund. The $50 million fund will focus primarily on post-seed funding for startups, with awards ranging from $250,000 to $1 million. Singh told Tech Cocktail DC there are more than enough early-stage options for entrepreneurs to explore, so he wanted to fill a market need. His company, Disruption Corporation, will also act as an incubator of sorts by providing courses, newsletters and other resources to maximize success rates for both business owners and investors.
People use crowdfunding for everything from paying for plastic surgery to funding their wedding. The key to successfully crowdfunding your startup business lies not only in the idea itself, but in the incentives you offer contributors. Indiegogo and Kickstarter allow crowdfunding projects to offer some type of reward to contributors who donate a certain amount of money. Make contributors feel like they are part of the project by giving them name credit. You can also offer premium updates and sneak peaks at the finished product, before it's officially released.
To help guarantee a successful campaign, you'll need a marketing campaign that includes social media. Determine if paying a PR agency to get your campaign visibility in large publications is worth the money. But remember, a unique, innovative idea will ultimately sell itself.
Most would-be entrepreneurs don't have a lot of money at their disposal, and many resort to good old-fashioned bootstrapping. Believe it or not, successful companies like Gawker and PlentyofFish.com were both side projects founded in garages and home offices. Today both are worth well over $100 million, according to Business Insider.
Take a financial inventory to see how much capital you can come up with. If you receive regular payments from an annuity or structured settlement, you may be able to sell your future payments for a lump sum of cash now. Or, consider taking out a home equity loan. Housing prices across the country have been on the rise for nearly two years, and you may be able to use the money to fund your startup.
The funds are out there, if you're determined to get them. If one method fails, move on to he next one, until you've achieved your goals.