Startup funding is a very important element in launching a new business idea. This initial phase in the life of a new innovative company can be exciting and full of opportunities, but it certainly requires commitment and a good understanding of the world of startup funding, especially when it comes to finding funding for the development and innovation of one’s startup.
In this article we will try to provide an overview of the main methods of funding, while knowing that this is only a starting point for choosing the most appropriate form of funding for your reality. In practice in Italy and Europe, it is possible to group the types of funds available into:
- venture capital funds;
- startup funding grant;
- crowdfunding;
- startup accelerators.
Startup Funds: Venture Capital
These are usually aimed at startups that are already formed but need to receive investment in order to grow and innovate.
These are funds managed by investment firms interested in financing innovative or high-growth startups in exchange, usually, for a percentage in equity, in other words a share in the startup’s own capital.
Certainly competition to win funding from a venture capital fund is fierce, so it is important to come up with a solid and innovative idea to convince them to invest in your startup.
Funding for startups: grant funding
Grant funding is one of the best forms of investment for a startup, especially an early stage one, since there is no requirement to repay the capital from the funding.
It is a type of funding that comes from public entities (governments, regions or the European Union), or nonprofit organizations such as Foundations, to foster innovation and growth in the area. Grant funding is generally provided through participation in public calls for proposals.
Funding for startups: crowdfunding
Crowdfunding is one of the most well-known forms of funding and is often exploited not only by startups but also by small entrepreneurs, developers or anyone seeking funding to develop their own product or idea.
Through online platforms developed specifically for this function, it is possible to raise funding coming from investors, who may be more or less influential, by pitching one’s idea or product and later “repaying” the investors through a share in the company, in this case we speak of equity crowdfunding, or by giving away the very service or product that the startup offers to all those who participated in the startup’s funding (reward crowdfunding).
Startup funding: raising through incubators and accelerators
Another fundamental method of fundraising, although not a true startup fund in this case, is to participate in an accelerator program, such as those of AC75 Startup Accelerator.
Accelerators prove to be an important resource for a startup since they can offer different types of funding and services. In particular, a startup accelerator can offer:
- the initial investment to launch their business idea;
- increases in capital following the first round of funding,so-called follow-ons;
- services to support the development of the startup that may include strategic-operational mentorship sessions, workshops, one-on-one sessions or coworking and networking spaces, which are essential for business growth.
Thus, there are several methods for a startup to find economic resources, each with different characteristics and prerequisites. It is then up to each startup to select the preferred fund or method of funding based on its needs, and the requirements of the fund itself. A long and complex road but one that if followed carefully will take your startup higher and higher and allow it to innovate and make itself more recognizable in the magnum sea of the startup world.
