by Nathan Sykes, founder of Finding an Outlet , where he writes about the latest in technology and business news and advice.
It’s not a well-kept secret that securing funding is at the top of most startup owners’ minds. It’s not necessarily a straightforward task, after all — it requires an almost unique blend of daring, creativity, strategy and probably more than a little luck.
The good news is, technology can be your ally if you’re a startup founder or hope to become one someday soon, and you want to know how to find funding sources to get your idea off the ground. Let’s take a look at a few of the most useful ways tech can come to your financial aid.
Social media, online communities and entrepreneurial forums
Technology has changed the meaning of the word “networking” pretty substantially. There will always be a place in the business world for conferences and trade shows, but the Internet allows startup owners and business enthusiasts of all kinds to bump digital shoulders in online forums and communities.
Platforms like these can be a great way to get access to business personalities, potential mentors or partners and, yes, investors and possible sources of funding. Websites like Angel.co, StartupNation and Gust provide a soapbox for those of us who have exciting and disruptive ideas, but who might not know how to cast a wide net when it comes to meeting people.
Social media is another great way to find influential people in your industry or niche. Just beware of fraudsters and phonies — and know how to vet somebody’s online presence before striking up a conversation about funding.
Crowdfunding and crowdsourcing
There might not be a more picture-perfect look at “democratized business” — that is, “voting with our dollars” — than crowdfunding. It’s your chance to make your pitch directly to the people who will end up using and benefiting from your product or service idea. And it’s a way to, potentially, cut out a lot of middlemen, including angel investors and venture capitalists.
Crowdsourcing, or crowdfunding, is where you solicit funding one customer at a time through pre-orders for unfinished products. Make no mistake: Even if campaigns on IndieGoGo, Kickstarter and GoFundMe seem like they’re a dime a dozen, the burden of proof is high if you want to succeed. Users want to see photographs, written updates and more from product creators and business owners. In other words, they want to know you are making progress and using their money wisely.
The staff on these funding platforms are pretty vigilant, too, meaning they usually find and suspend low-effort campaigns or obvious scam attempts. But if you’ve got the hustle it takes to make your pitch directly to customers and then find manufacturers or other partners to help you over the finish line, it can be a great way to cut out a lot of the nonsense from the business-launching process.
Apply for small business loans and grants using digital apps and consultancies
Would-be business owners have long been familiar with the ancient rite of applying for business loans with a credit union or a bank. And there is, of course, nothing especially technologically advanced about doing so — unless you’re using technology to put together your business plan, your budget and everything else you’ll need to successfully make your case to a lender. The three most important items you need in applying for a loan are:
A detailed business plan and an equally detailed budget
Any documentation required by specific types of loans, like those intended for long-term investment purchases, such as real estate
Documentation concerning your current personal financial standing, records for past years and projections for the future
After that, you’ll need to find the right lender. But where does technology enter the mix?
To put it mildly, multi-year business plans and budgets can be complicated things to draw up. That is why financial platforms and apps like Mint.com, QuickBooks and You Need a Budget are such a massive help for entrepreneurs who want to demystify and get a top-down view of their entire financial situation. And then there are digital-first consultancies like Fundera, which were specifically designed to help entrepreneurs find out about funding options they didn’t know they had, based on a deep dive into their existing financial data.
Initial coin offerings
Just as it’s making waves elsewhere, blockchain has arrived to shake things up in the startup funding scene. But how does an initial coin offering, or ICO, actually work? It goes a little like this: An entrepreneur has a great new idea for a business. Businesses of all kinds can now issue “coins” in cryptocurrency to people who believe in the idea or who are contributing to the endeavor, such as developers and engineers in a way similar to crowdfunding.
It’s common for entrepreneurs pursuing ICOs to reserve coins, or tokens, for company leadership and employees. Each business is different and puts these tokens to use in different ways. For file-sharing or data storage companies, the parties buying tokens are either investors or those who are using the service. The more people buying in, the more valuable each one becomes. Many people see ICOs and blockchain in general as a fully decentralized way to build and fund a company, without any third parties facilitating the flow of cash. But even without lip service from financial and business experts, the results already speak for themselves: 2017 saw $291 million raised through initial coin offerings. In comparison, ordinary venture funding brought in $187 million in the same period.
If all that sounds like something brand-new and unexplored, that’s because it is, of course. But some of the other tips on this list might be more within your comfort zone. Just know you have options when it comes to finding funding for your promising new startup.