From the team of Intelectium We'll tell you which are the main ways to finance your startup. These funding mechanisms are especially designed for technology-based startups.
- Self-funding or Bootstrapping
The first source of funding for your startup to turn to. As the name suggests, self-financing or bootstrapping consists of finance your startup with your own money. It is a way of showing the entrepreneur or entrepreneurs own commitment to the project and usually helps to give confidence to future investors or public sources of co-investment. However, this is usually a limitation, since many times there is not all the sufficient funds to scale the business. Therefore, at Intelectium, we see it as a source of funding in the early or early stages of the startup, but which in the medium and long term will require other financial alternatives in order to grow the business.
- The 3 F's (Family, Friends & Fools)
Followed by self-financing usually comes the investment obtained from the people closest to the entrepreneur, family, friends and someone you know, who see potential in the project and who want to help out financially in the earliest stages of the project. It's about the first investment of external capital received by the startup.
- Incubators or Accelerators
There are different startup incubation and acceleration programs, both in Spain and worldwide. These types of organizations specialized in supporting entrepreneurial projects they provide both capital and support (mentoring) and usually offer work space for entrepreneurs in exchange for a small number of shares in the company.
- Investors or Business Angels
In a next stage is when the investors or Business Angels (BAs).These are individuals who they invest their own money in startups in exchange for a shareholding.By investing in startups in these very early stages, Business Angels play a crucial role and become Startup advisors offering advice and advice to entrepreneurs. The investment range of Business Angels usually ranges from 20,000 to 250,000 euros, with smaller tickets of between 20,000 and 50,000 euros being more common. This type of investor usually seeks a high return (multiplying their investment x10 times or more) within a period of about 5 years from the original investment.
- Investment Funds or Venture Capital
This is one of the most valued sources of funding by entrepreneurs. Venture Capital, or investment funds, are institutional investors specialized in different verticals or technologies. There are also different VCs depending on the stage of the startup they enter (From pre-seed to growth). They invest capital in startups in exchange for a shareholding.
- Crowdfunding
The funding source of Crowdfunding is a way to pool small capital contributions from a large number of different individuals, expanding the company's number of potential investors. It is also called micro-sponsorship. There are well-known Crowdfunding platforms in Spain and internationally, some of the most popular today are: The Crowd Angel, Fellow Funders...
- Public funding for startups
In Spain there are a wide variety of public funding instruments that support innovation and entrepreneurship.These funding instruments provide soft loans or non-refundable grants so that entrepreneurs can move forward with their business development and innovations. The most prominent or most popular lines in Spain are the Enisa participatory loans, an aid that is often requested to leverage investment rounds. Since Enisa matches or 'almost equals' the external contribution you get for your startup with a participatory loan without personal guarantees. Another of the best-known lines is Neotec, a non-refundable grant, help that entrepreneurs do not have to repay, for technology-based companies that are less than 3 years old.From Intelectium we specialize in financing startups and we help to carry out and manage all types of public aid for entrepreneurs.If you are interested in evaluating your company's fit with existing public funding lines in Spain and at European level, contact us without any commitment. We'll help you evaluate the options that best suit your company and state of development.
- Bank loans for entrepreneurs
Access to bank loans depends on the stage at which the startup is at, the business model and the traction it shows (the financial figures). When hiring it, you should take into account the interest rate, the repayment period and the grace period. If you found the article on main sources of funding for startups and are you interested in learning more about the entrepreneurial and investment ecosystem, you can visit our website to find out much more
