The Funding Options for Student Tech Startups
Ultimately, the majority of successful tech startups will end up being the subject of a lucrative merger of acquisition deal. After all, the value of these transactions in the technology sector totalled $500 billion in 2016 alone, with this being established as the second-highest annual amount since the turn of the century.
Still, all tech startups will require initial funding to bring their products or services to market, and this can pose a huge challenge to entrepreneurs.
This is particularly true for student tech startups, so here are some of the most viable funding options available to this demographic in 2018.
1. Short-term Loans for Low-cost Startups
For modest tech startups that boast minimal launch costs, the key is to minimise the total cost of borrowing and optimise the overall level of equity that you retain.
To this end, short-term and unsecured loans can provide an excellent boost to your business plans. From the perspective of students, this means liaising with specialist lenders such as Smart-pig, who offer competitive borrowing rates and products that are targeted at those in higher education.
This can provide a flexible and low-cost lending that sustains a lean business model, while enabling entrepreneurs to retain control of their venture.
2. Invoice Financing for Medium-sized Startups
For tech startups that require larger amounts of capital or are likely to struggle with cash-flow during their formative months of trading, invoice financing provides a more suitable funding option.
Through this model, firms can effectively sell their accounts receivable to third-party investors, as they leverage their invoices to raise instant capital. This can provide an instant and low-cost source of cash-flow, negating 30, 60 and 90-day invoice terms in the process.
The money is then repaid when clients settle their invoice, creating a short-term cycle of debt that does not encumber the business.
This helps your startup to receive regular cash injections, without forcing you to sacrifice equity in the business.
3. Equity Crowdfunding for Large-scale Startups
For some tech startups, the nature of their product or service creates extremely high development and lunch costs. This requires a higher amount of initial funding, and equity crowdfunding remains one of the best avenues through which to secure capital.
With equity crowdfunding, entrepreneurs can market their proposition in a bid to raise money from private investors, while using equity in their business to secure funds and create an initial source of working capital.
Investors are known to be keen on investing in promising tech startups in the digital age, so you’ll need to present your proposition as clearly as possible while also offering value to interested parties.
It’s also important that you determine the precise amount of equity that you’re willing to give away, in relation to the amount of capital that you need to launch your business.