8 Options Entrepreneurs Utilize for Startup Concept Funding

Concept Funding

Entrepreneurs have numerous options for obtaining funding to explore and validate their startup concept.

Concept funding options include:

  1. Self-Funding 

    Most startups are funded in the beginning, at least partially, by the entrepreneur. Such funding is derived from personal cash reserves, personal loans, credit cards, home equity loans and for older entrepreneurs, from self-directed 401Ks.

  2. Family and Friends 

    An excellent source for early funding of concepts is family and friends. However, the entrepreneur should be careful that expectations are appropriately established to avoid developing future potential problems.

  3. Loans 

    Various options exist for obtaining loans including the SBA, Community Banks and Credit Unions. However, the entrepreneur should recognize that loans increase the risk of the venture because they must be re-paid with interest. Additionally, the documentation related to obtaining an SBA loan is extensive and time consuming. Finally, Community Banks and Credit Unions require extremely high qualification standards. Take all these factors into consideration, be selective, and research what banks will expect of you before giving you a loan.

  4. Pitch Contests 

    Pitch contests give entrepreneurs the chance to validate their concept and receive funding from organizations and investor groups. There are many top tier business pitch competitions like the Amazon Web Services Pitch Events, the COSE Business Pitch Competition and 43North within the USA. Nevertheless, there are also regional entrepreneur conferences such as 3686 South, TechCrunch Disrupt NYC, Startup World Cup 2017 -US West Coast that also provide high profile guest speakers, workshops, and networking opportunities. Always research your local entrepreneurial ecosystem as smaller pitch competitions are on the rise.

  5. Accelerators 

    Think of accelerators as bootcamps for entrepreneurs and startups. They provide educational workshops, mentors, and a chance to pitch to investors by the end of the program. Qualifying for the programs will vary by accelerator, for example Aviatra Accelerators will only receive women-led startups while Carao Ventures take businesses within Central America. Big name accelerators include The Jumpstart Foundry, Tech Stars, Y Combinator, EVC Ventures, and Start-Up Chile.

  6. Grants 

    Both the State and Federal governments and many trade associations and foundations offer grants based on needs in various functional disciplines. Special programs may be available to minorities, women and single mothers.

  7. Crowdfunding 

    This is the fastest growing, and most unusual form of startup funding. The most famous crowdfunding project in America was the Statue of Liberty. The Crowdfunding “Money for Goods” funding model provides entrepreneurs an internet based model for funding business concepts. A large number of such models currently operate across the globe.

  8. Angels 

    A group of wealthier individuals who are able to invest funds to develop a company. Concept and seed stage companies may be of interest to individual angels, super angels and angel groups with a focus on these particular stages.

 

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Tony Lettich

Tony Lettich has previous corporate venture capital experience and currently serves as Managing Director of The Angel Roundtable. He is a co-founder of FundingSage, which provides valuable information, tools and resources to entrepreneurs seeking to start, grow and fund a business.