With all the smartphones and tablets, technology has surely affected our everyday lives quite a lot. Not only this, but all these devices have also changed the business world. There are more and more tech startups arising every single day. Still, just like with any other startups, funding your new tech business can be difficult, because bank loans are no longer the best option.Luckily, today there are many alternative ways you can fund your tech startup. Here are 4 of them that you might find appealing.
Crowdfunding is a great option for tech startups, especially the ones that make software. It is very important to know the difference between equity and crowdfunding. In the first case, a business owner gives equity to the people who are ready to invest in their business while in crowdfunding, people who invest in a business owner’s idea get certain gifts once the company starts making profit. Even though sometimes crowdfunders can get a share in the company the invested in, in most of the cases they will get some different kind of reward (free software, promotional t-shirts, etc.).
Quite often, people confuse peer-to-peer lending with crowdfunding. Still, these two strategies are much different. Even though startups are also looking for the investors online, there is no equity or rewards for the investors. Instead, the way you are supposed to return the loan is always monetary. Obviously, there will be some interest that will encourage a business or an entity to invest in your startup. Peer-to-peer lending is similar to bank loans but it is usually much more flexible. Not to mention that there is less paperwork involved, that you will have to deal with.
Getting financed by an angel investor is another great alternative for startups. In this case, you small business will be financed by a person or entity in form of a cash injection. In most of the cases, angel investors continue to fund the same startup and help it grow. Angel investors are usually more interested in development of your business rather than immediate profit. If you decide to fund your business this way, bear in mind that it is up to angel investors to decide how involved they are going to be.
Another great way you can get funds for your tech business is opting for invoice financing. In fact, this is how most of the businesses are being financed. In this case it is up to you to pay a percentage of the invoice amount to your lender as a fee for using their funds. You can sell your invoices to your lender for a lower price right away or sell them for a standard price but agree to pay some additional fees later on. Many tech businesses decide to use invoice finance as it allows them to offer their customers better payment options.
Technology is a line of business that requires a lot of thinking and careful investment. Make sure you think about some of these alternative ways for financing a tech startup and you are guaranteed to make enough profit to run your business. Also, when choosing the financing strategy for your tech startup, remember that long-term success is something you should always aim at.
Dan Radak is a marketing professional with ten years of experience. He is a coauthor on several websites and regular contributor to BizzMark Blog. Currently, he is working with a number of companies in the field of digital marketing, closely collaborating with a couple of e-commerce companies.