5 ways to get funding as a startup

Raise money the easy way
Amal Alshamsi
by 
Amal Alshamsi
5 ways to get funding as a startup
🔑 Key points: 
- As an early-stage startup you have 5 avenues for funding: crowdfunding, government grants, public and private loans, competitions, and investors 
- Depending on what funding stream you pursue, here are the answers as to whether you need to pay back the money or not
- The most straightforward way to fund your startup in the early days is through people that you know, so reach out to family and friends that could support you. 
- Harness the power of community by creating a compelling story about the pressing need that your product or service will solve and get your idea funded through crowdfunding. 
- Look out for local government grants or loans in your city, as there will be less competition for them and a higher chance that you can secure the funding 
- Apply for competitions in your industry to potentially win investment in your idea
- Keep an eye out for angel investors that are interested in your space and use online networking sites (listed below) to get matched with an interested angel investor

Running a business and short on funds to get to that next step? While it may seem like a long and complicated process, getting funding is actually fairly straightforward. There are many ways that you can raise money for your startup and you can try multiple avenues. 

All you need is a business idea and a plan to execute it [link]. You have even more of a leg up if you’ve got steady support from a mentor that can help you craft a compelling pitch for your business. 

Most conversations around startup funds are around Venture Capital funds or Angel Investors, which seem many steps ahead for an early-stage founder. But there are many sources that you can turn to ahead of those.

I. Crowdfunding

What is crowdfunding? 

Raising money from a large number of people, typically online through crowdfunding platforms. This funding method uses the power of social media and the community to get people excited about a business venture enough to offer their own money to back it. 

How does it work? Do you pay back the money?

Individuals might donate money altruistically, especially if your product is presented as a solution to a pressing need. 

Alternatively, people may donate with the expectation of something in return. For example, they may receive small tokens of appreciation (caps, shirts, or free samples), or at times even equity. Before you set up a crowdfunding fundraiser, keep in mind what you are ready to offer in return for their support. 

There are many ways to crowdfund, here are 3 routes:

1. Family, friends, and colleagues 

The most solid approach to raising funds in the early stages is through people you know. Pitch your idea to them and clearly communicate the risks involved in funding your venture, then let them decide if they’d like to get involved. The perk is that they tend to be more patient on repayments. Additionally, proving that you have a dedicated personal network looks good to future investors.

2. Customer crowdfunding

Fund your physical product through crowdfunding platforms such as Kickstarter and Indiegogo. Get your account set up before manufacturing your product so that you can advertise it and get a good amount of sales guaranteed. Besides giving you the funds you need to manufacture your product, you can also build up enough funds to scale. Investors will not have to give up shares if their reward is the product itself. 

Remember to account for the hidden costs of creating your product and rewarding your supporters. 

3. Small-time investor crowdfunding

Digital businesses or startups that need larger amounts of funding should use Crowdcube and Seedrs. These platforms turn supporters into shareholders. Investors on these platforms get equity in your company, so they’re more likely to invest larger amounts than a typical customer. 

II. Government grants

What is a government grant? 

A sum of money that is awarded to a company from the government for the purpose to ensure a business’s growth and development. The money can be used on training, market expansion, or other necessary investments.

How do they work?

 

Unlike a loan, a grant does not need to be repaid. That is what makes them ideal for companies just starting out. A grant application is fairly straightforward, especially if you can carve out your idea as a pressing need within a specific field. Look for guidance on how to apply here.

Here are some grants to look into:

1. UK Research and Innovation

This governmental body offers funding to emerging businesses across all academic disciplines and industrial areas. Depending on the availability of funds for a certain area, you can search and apply for funding here.

2. Local borough’s small-business grants schemes 

Take a look into specific grants in your area by making a search for “startup grant [your area]”. These will be easier to get into because there is a smaller pool of founders that fit the criteria. 

3. Swoop funding

For more grant options specific to your business and its current stage, you can sign up to Swoop to get matched to a grant that suits you. Browse on Swoop here.     

III. Public and Private Loans 

What is a private or public loan? 

A private loan is provided by a bank or other financial institution. A public loan is provided by the government. Typically, you would repay at a fixed interest rate on an initial lump sum. 

How do they work? 

There are two types of loans, unsecured and secured. 

A. Secured loans are loans that are secured by your assets (this may include commercial property, commercial equipment, unsold stock, etc). If you are unable to make a payment, the lender has the right to take hold of your assets. Owing to the lowered risk for the lender, these types of loans are typically cheaper. 

B. Unsecured loans are loans that don’t require you to provide collateral. This means that the interest rates are likely to be changed by the lender as they are assuming a higher degree of risk. The requirements for this kind of loan are a stellar credit score and cash flow projections. 

Here are 3 types of loans that you can consider to fund your business:

1. Peer-to-peer business loans

Get up to £500,000 from peer lenders on the Funding Circle, Zopa, or Ratesetter. These platforms review your application and send it to interested investors, in return for a fixed monthly repayment. This is a great intermediate step between working with larger banks that don’t readily provide funding to early-stage startups. 

2. Government Loans

Get up to £25,000 to start or grow your early-stage startup with Start up Loans here. You can borrow between £500 and £25,000, payable over one to five years, at a fixed interest rate of 6% per annum. When you apply, you’re paired with a dedicated business adviser, who supports you with completing your application form. 

3. Investor Matching

Uncapped and Pipe are platforms that provide digital and SaaS companies with funding by matching you with investors for a discounted rate. You repay as you make revenue with no set repayment and no compounding interest or equity. 

4. Swoop funding

If you are still looking for further options, you can sign up to Swoop to browse other loans based on your business’s stage and projected performance. Browse on Swoop here.

IV. Competitions 

What are startup competitions? 

An event that gives you the opportunity to pitch your startup to investors for the chance to win cash or investment capital. 

 

How do they work? 

A startup applies to a competition and gets selected based on a set of criteria, then competes against other businesses/founders for the prize(s) through pitching rounds. There is a lot of preparation involved which can be time-consuming however, there is a huge networking opportunity and a great chance to practice your pitch in front of others and get feedback.

Check out these competitions for your startup: 

1. The Start-Up Series

Each month, there’s a competition with the chance to win an equity investment of up to £250,000. They’re open for entries from the 1st to the 14th of every month with an easy application that can be filled here.

2. Smart Grant 

Innovate UK is putting forward a sum of £25 million in funding forward for businesses that can come up with a creative idea that can positively impact the economy. To learn more about the sign-up process, selection criteria and the next available opportunity check it out here.

V. Investors

How does working with investors work?

 

Startups can raise money without being obligated to repay it by raising venture capital rather than taking out a loan. In the event of a startup's failure, an investor cannot take back the amount he or she has lent to the startup.

However, while traditional loans have fixed interest rates, startup equity investors buy a percentage of the company from their founders, so accepting that money might be a higher cost for the company.

Here are two categories of investments to consider: 

1. Angel Investors

Angel investors are individuals that provide capital and support to early-stage businesses. As you scale up your business, you’ll want to reach out to angel investors because they invest in early ideas with their own money in exchange for a minority stake. Rather than a cold approach, pitch your startup to an angel-investment network that is relevant to your industry. 

"One of our angel investors just introduced me to the Chief Operating Officer of Deutsche Bank, which was unreal and no one’s ever done that for us. Angels often come in packs, usually 5 or 6 others once you’ve convinced the first, so if you can convince them as well, that’s your first round deep in action! That’s what happened with us.”
-Jake Casson, Oneday member and founder of Monet

Get paired with an angel investor through ​​SeedInvest here.

Here are the top angel investor networks that are open to all business types and industries: Craige Capital, The Startup Funding Club, Angel Capital Group, Angel Co-fund.

For Saas products, apply to pitch to these angel investor networks: Coral Reef, Firestartr.

2. Venture Capital funds (VC)

Most stories of successful startups involve this type of funding but it’s the rarest and usually attainable only by companies with rapid growth or past/existing seed funding round from an angel investor. 

A VC investment is the most hands-on when it comes to your business operation as the investors can play a role in the business administration or become an associate or partner.

Look into Fuel Ventures, Playfair Capital, Seed Camp, and Forward Partners to start pitching your business. 

* The options above are not official financial recommendations or advice. We’re just providing you with information about the options that are available to early-stage founders. Any financial decisions made must be taken out of your own volition.

FAQ: 

What is crowdfunding for startups?

Typically done online through crowdfunding platforms, raising money from a large number of people. People offer their own money to back a business venture using social media and the community to spread the word about it. 

What are startup government grants?

The government awards a company money to ensure the growth and development of the business. Training, market expansion, or other investments can be made with the funds. You don’t have to pay them back. 

How do public and private loans work for small businesses? 

Banks and other financial institutions provide private loans. Governments provide public loans. In most cases, you would repay a lump sum at a fixed interest rate. There are unsecured loans (not tied to collateral, expensive) and secured loans (tied to assets, cheaper). 

 

What is the benefit of a startup competition? 

Through pitching rounds, startups compete against other businesses/founders for prizes in a competition. While preparation can be time-consuming, there are several benefits, such as networking opportunities and the chance to practice your pitch in front of others.

 

How do I get in touch with angel investors?

 If you want to raise capital for your startup, you should pitch it to an angel-investment network that is relevant to your industry, rather than a cold approach. Get paired with them on online angel investor networks such as Craige Capital, The Startup Funding Club, Angel Capital Group, Angel Co-fund or ​​SeedInvest.

 

How do I get funded by investors? 

By raising venture capital rather than taking out a loan, startups can raise money without having to repay it. In the event that a startup fails, an investor cannot take back his or her investment.

 The downside is that startup equity investors buy a percentage of your company from your founders.

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5 ways to raise money as a startup

Raise money the easy way

🔑 Key points: 
- As an early-stage startup you have 5 avenues for funding: crowdfunding, government grants, public and private loans, competitions, and investors 
- Depending on what funding stream you pursue, here are the answers as to whether you need to pay back the money or not
- The most straightforward way to fund your startup in the early days is through people that you know, so reach out to family and friends that could support you. 
- Harness the power of community by creating a compelling story about the pressing need that your product or service will solve and get your idea funded through crowdfunding. 
- Look out for local government grants or loans in your city, as there will be less competition for them and a higher chance that you can secure the funding 
- Apply for competitions in your industry to potentially win investment in your idea
- Keep an eye out for angel investors that are interested in your space and use online networking sites (listed below) to get matched with an interested angel investor

Running a business and short on funds to get to that next step? While it may seem like a long and complicated process, getting funding is actually fairly straightforward. There are many ways that you can raise money for your startup and you can try multiple avenues. 

All you need is a business idea and a plan to execute it [link]. You have even more of a leg up if you’ve got steady support from a mentor that can help you craft a compelling pitch for your business. 

Most conversations around startup funds are around Venture Capital funds or Angel Investors, which seem many steps ahead for an early-stage founder. But there are many sources that you can turn to ahead of those.

I. Crowdfunding

What is crowdfunding? 

Raising money from a large number of people, typically online through crowdfunding platforms. This funding method uses the power of social media and the community to get people excited about a business venture enough to offer their own money to back it. 

How does it work? Do you pay back the money?

Individuals might donate money altruistically, especially if your product is presented as a solution to a pressing need. 

Alternatively, people may donate with the expectation of something in return. For example, they may receive small tokens of appreciation (caps, shirts, or free samples), or at times even equity. Before you set up a crowdfunding fundraiser, keep in mind what you are ready to offer in return for their support. 

There are many ways to crowdfund, here are 3 routes:

1. Family, friends, and colleagues 

The most solid approach to raising funds in the early stages is through people you know. Pitch your idea to them and clearly communicate the risks involved in funding your venture, then let them decide if they’d like to get involved. The perk is that they tend to be more patient on repayments. Additionally, proving that you have a dedicated personal network looks good to future investors.

2. Customer crowdfunding

Fund your physical product through crowdfunding platforms such as Kickstarter and Indiegogo. Get your account set up before manufacturing your product so that you can advertise it and get a good amount of sales guaranteed. Besides giving you the funds you need to manufacture your product, you can also build up enough funds to scale. Investors will not have to give up shares if their reward is the product itself. 

Remember to account for the hidden costs of creating your product and rewarding your supporters. 

3. Small-time investor crowdfunding

Digital businesses or startups that need larger amounts of funding should use Crowdcube and Seedrs. These platforms turn supporters into shareholders. Investors on these platforms get equity in your company, so they’re more likely to invest larger amounts than a typical customer. 

II. Government grants

What is a government grant? 

A sum of money that is awarded to a company from the government for the purpose to ensure a business’s growth and development. The money can be used on training, market expansion, or other necessary investments.

How do they work?

 

Unlike a loan, a grant does not need to be repaid. That is what makes them ideal for companies just starting out. A grant application is fairly straightforward, especially if you can carve out your idea as a pressing need within a specific field. Look for guidance on how to apply here.

Here are some grants to look into:

1. UK Research and Innovation

This governmental body offers funding to emerging businesses across all academic disciplines and industrial areas. Depending on the availability of funds for a certain area, you can search and apply for funding here.

2. Local borough’s small-business grants schemes 

Take a look into specific grants in your area by making a search for “startup grant [your area]”. These will be easier to get into because there is a smaller pool of founders that fit the criteria. 

3. Swoop funding

For more grant options specific to your business and its current stage, you can sign up to Swoop to get matched to a grant that suits you. Browse on Swoop here.     

III. Public and Private Loans 

What is a private or public loan? 

A private loan is provided by a bank or other financial institution. A public loan is provided by the government. Typically, you would repay at a fixed interest rate on an initial lump sum. 

How do they work? 

There are two types of loans, unsecured and secured. 

A. Secured loans are loans that are secured by your assets (this may include commercial property, commercial equipment, unsold stock, etc). If you are unable to make a payment, the lender has the right to take hold of your assets. Owing to the lowered risk for the lender, these types of loans are typically cheaper. 

B. Unsecured loans are loans that don’t require you to provide collateral. This means that the interest rates are likely to be changed by the lender as they are assuming a higher degree of risk. The requirements for this kind of loan are a stellar credit score and cash flow projections. 

Here are 3 types of loans that you can consider to fund your business:

1. Peer-to-peer business loans

Get up to £500,000 from peer lenders on the Funding Circle, Zopa, or Ratesetter. These platforms review your application and send it to interested investors, in return for a fixed monthly repayment. This is a great intermediate step between working with larger banks that don’t readily provide funding to early-stage startups. 

2. Government Loans

Get up to £25,000 to start or grow your early-stage startup with Start up Loans here. You can borrow between £500 and £25,000, payable over one to five years, at a fixed interest rate of 6% per annum. When you apply, you’re paired with a dedicated business adviser, who supports you with completing your application form. 

3. Investor Matching

Uncapped and Pipe are platforms that provide digital and SaaS companies with funding by matching you with investors for a discounted rate. You repay as you make revenue with no set repayment and no compounding interest or equity. 

4. Swoop funding

If you are still looking for further options, you can sign up to Swoop to browse other loans based on your business’s stage and projected performance. Browse on Swoop here.

IV. Competitions 

What are startup competitions? 

An event that gives you the opportunity to pitch your startup to investors for the chance to win cash or investment capital. 

 

How do they work? 

A startup applies to a competition and gets selected based on a set of criteria, then competes against other businesses/founders for the prize(s) through pitching rounds. There is a lot of preparation involved which can be time-consuming however, there is a huge networking opportunity and a great chance to practice your pitch in front of others and get feedback.

Check out these competitions for your startup: 

1. The Start-Up Series

Each month, there’s a competition with the chance to win an equity investment of up to £250,000. They’re open for entries from the 1st to the 14th of every month with an easy application that can be filled here.

2. Smart Grant 

Innovate UK is putting forward a sum of £25 million in funding forward for businesses that can come up with a creative idea that can positively impact the economy. To learn more about the sign-up process, selection criteria and the next available opportunity check it out here.

V. Investors

How does working with investors work?

 

Startups can raise money without being obligated to repay it by raising venture capital rather than taking out a loan. In the event of a startup's failure, an investor cannot take back the amount he or she has lent to the startup.

However, while traditional loans have fixed interest rates, startup equity investors buy a percentage of the company from their founders, so accepting that money might be a higher cost for the company.

Here are two categories of investments to consider: 

1. Angel Investors

Angel investors are individuals that provide capital and support to early-stage businesses. As you scale up your business, you’ll want to reach out to angel investors because they invest in early ideas with their own money in exchange for a minority stake. Rather than a cold approach, pitch your startup to an angel-investment network that is relevant to your industry. 

"One of our angel investors just introduced me to the Chief Operating Officer of Deutsche Bank, which was unreal and no one’s ever done that for us. Angels often come in packs, usually 5 or 6 others once you’ve convinced the first, so if you can convince them as well, that’s your first round deep in action! That’s what happened with us.”
-Jake Casson, Oneday member and founder of Monet

Get paired with an angel investor through ​​SeedInvest here.

Here are the top angel investor networks that are open to all business types and industries: Craige Capital, The Startup Funding Club, Angel Capital Group, Angel Co-fund.

For Saas products, apply to pitch to these angel investor networks: Coral Reef, Firestartr.

2. Venture Capital funds (VC)

Most stories of successful startups involve this type of funding but it’s the rarest and usually attainable only by companies with rapid growth or past/existing seed funding round from an angel investor. 

A VC investment is the most hands-on when it comes to your business operation as the investors can play a role in the business administration or become an associate or partner.

Look into Fuel Ventures, Playfair Capital, Seed Camp, and Forward Partners to start pitching your business. 

* The options above are not official financial recommendations or advice. We’re just providing you with information about the options that are available to early-stage founders. Any financial decisions made must be taken out of your own volition.

FAQ: 

What is crowdfunding for startups?

Typically done online through crowdfunding platforms, raising money from a large number of people. People offer their own money to back a business venture using social media and the community to spread the word about it. 

What are startup government grants?

The government awards a company money to ensure the growth and development of the business. Training, market expansion, or other investments can be made with the funds. You don’t have to pay them back. 

How do public and private loans work for small businesses? 

Banks and other financial institutions provide private loans. Governments provide public loans. In most cases, you would repay a lump sum at a fixed interest rate. There are unsecured loans (not tied to collateral, expensive) and secured loans (tied to assets, cheaper). 

 

What is the benefit of a startup competition? 

Through pitching rounds, startups compete against other businesses/founders for prizes in a competition. While preparation can be time-consuming, there are several benefits, such as networking opportunities and the chance to practice your pitch in front of others.

 

How do I get in touch with angel investors?

 If you want to raise capital for your startup, you should pitch it to an angel-investment network that is relevant to your industry, rather than a cold approach. Get paired with them on online angel investor networks such as Craige Capital, The Startup Funding Club, Angel Capital Group, Angel Co-fund or ​​SeedInvest.

 

How do I get funded by investors? 

By raising venture capital rather than taking out a loan, startups can raise money without having to repay it. In the event that a startup fails, an investor cannot take back his or her investment.

 The downside is that startup equity investors buy a percentage of your company from your founders.

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