Fund Your Tech Startup!
Recently, we’ve spent some time talking to engineering and design studies and one of the most common questions we’ve received is how to fund a startup. Thus, we’ve put together a run down of different options to gain and win funding.
Many startups have used online platforms to raise funds. These are typically divided into platforms that encourage individual investment (eg. Kickstarter, Indiegogo) versus ones that only allow the involvement of accredited investors (eg. AngelList, FundersClub). The latter option usually requires that the investors get a share of the company if (when!) it becomes financially viable.
The most well-funded campaign of all time on Kickstarter was actually an IoT Wearble named Pebble Watch. They raised over USD 20 million. Of course, most of the time you’re not looking for millions of dollars off the bat, but just enough capital to create a device or get off the ground. Crowdfunding is still a viable area to look if you’re interested.
Partner with an Established Company
Many large companies provide unique funding opportunities for entrepreneurs. Most tech companies have dedicated divisions that search only for interesting startups, either supporting their development or buing them outright (eg. Google’s purchase of Nest). If not purchased, the monetary investment usually means that the company also gets shares in the startup when it’s viable.
The competition we highlighted in the fall – the Nordic IoT Challenge – is one of the few competitions that didn’t have the caveat that the established company received a monetary share of the startup. Instead, Telenor Connexion gave €25,000 to the most interesting startup or startup concept with no strings attached (except for the option to work with Telenor executives if the startup so chooses). With hope they’ll do it this year too!
Small Business Grant (Government / University)
Many governments (including Sweden and the US) provide grants to entrepreneurs to encourage technological development. And if you’re a student at a university, places like Lund or Chalmers have innovation ‘departments’ that financially support brilliant ideas. The governmental department ALMI provides the initial grant to help very young startups take off.
Incubators & Accelerators
Incubators and Accelerators are business that provide free support to small startups with the deal that the incubator or accelerator receives shares of the startup once it is financially viable. Incubators and accelerators are also good places to meet other like-minded entrepreneurs and possibly collaborate.
The term hackathon is decently new, and usually involves getting brilliant people to come together in teams to create a theoretical product or device within a certain timeframe (sometimes 24 hours sometimes a week). Sometimes, the group organising the hackathon or a sponsor will pick a certain product to fund so that it can become a real company. This is not the most reliable of ways to gain money, but it’s definitely a great way to gain experience, both in collaboration and in short-term idea development.
As opposed to a government or university grant, a small business loan is given by a bank and has favourable terms (in that you need to repay them). This is a common way to gain money but you usually have to have equity as collateral (eg. use your house or car as a weight against the money the bank will loan you in case you can’t repay the loan).
If you’re interested in any of these options, there are long lists online of examples of each. To help you out, here are a couple quick references:
- Wikipedia’s Massive List (International)
Parters with Existing Companies
- Many companies have this option (eg. Google, Cisco, Samsung, Apple). If you’re interested in the Telenor partnership (without terms of share-ownership), you can look at the Nordic IoT Competition (Nordic Countries-specific)
Small Business Grants
- Gov’t & University (Sweden-specific)
Incubators & Accelerators
- SISP (Sweden Specific)
- Hackathons are temporary and the locations vary. Searching for your geographic region will usually give you anywhere from two to a hundred options.
- Bank loans also vary, as you typically need to compare the terms of each bank.
We hope this gives you a decent and quick overview of ways to fund your startup idea. So, with that, we should say, Good Luck! (Or, på Svenska, Lycka Till!)