Startup Hack: Finding The Right Funding Source

Especially in the early stages of starting a business, the issue of raising capital is important. There is a wide range of funding options – from external capital providers to government programs.

All funding models require that founders first clarify what the additional funds will be used for.Applying for funding provides an excellent opportunity to clarify one’s business model. If the project is digital, the development model should also be put under the microscope.

Funding Success = Strategy + Exchange

Funding programs, business angels, venture capital, financial aid – which  model suits my company?

There are no blueprints for the financing strategy of one’s own company. This makes it all the more important to conduct thorough research before choosing the means of financing. This is because needs and funding offers vary, depending on the stage of development and the nature of the project.

Exchanging ideas with other founders in a similar situation helps to find the right funding partner.

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Taking time to talk and discuss ideas with each other saves time that would otherwise be spent on unnecessary thought loops.

Investments from External as an Initial Spark

There are external investors and programs that are particularly specialized in financing very young companies.

In the seed phase, ideas can be refined by drawing on expert know-how, thus narrowing down the choice of the funding program. Often, the company benefits here not only from the financial grant but also from the existing network and exchange of knowledge.

In Darmstadt and the surrounding area, for example, the Innovation and Start-up Center of the TU-Darmstadt, HIGHEST, advises founders in the early phase.

Foundation Phases and Funding Models

Not only the structure of startups and their development differ greatly from one another, but also the type and amount of funding ranges from a few thousand euros to unicorn millions.

Seed Phase: First phase of the financing of a startup through subsidies or money from the FFF circle (family, friends & fools), occasionally already through business angels. If the financing is particularly small, it is also referred to as the »Pre-Seed Phase«.

Round A: This is the first phase of venture capital financing. Particularly interesting for startups that are aiming for extreme growth phases and are planning several venture capital rounds. The long-term goal here is usually an initial public offering (IPO).

Pre Revenue Phase: Phase in which the company’s business model is being developed, but it is not yet generating revenues. This often applies to startups that are developing innovative research and/or development-intensive products, such as satellite-based imaging methods in agriculture.

»Founders should not see funding as a charity, but as innovation support.«

Lionel Born, Founder and CEO L-One Systems

Researching appropriate funding is always worthwhile. In addition to that, it also offers the opportunity to put goals and processes to the test. Applying for funding provides an excellent opportunity to clarify the project description and update information on the product, goal and outcome.

Technical requirements, budget and funding do not only help to apply for funding, but also to position oneself and to check if the focus is (still) the right one.

Financing options should be compared in advance. A decision matrix helps to establish and prioritize criteria in order to carry out a structured comparison of providers. We provide a template for a decision matrix in our ebook (see link below).

Before deciding to apply for a particular program, various factors help to determine how well the funding model fits one’s own company.

Does it fit with the strategy to trade shares for experience? How much funding over what time frame does the business plan allow?

Especially for the development of digital products, it is enormously important to first decide on a development model, in order to be able to assess which funding partner is suitable.

LINKS

› Gründer.de: Apply for government funding quickly and easily (GER).

› HIGHEST, Innovation and Start-up Center of TU Darmstadt: The HIGHEST consulting team provides information on IP & financing (GER).

› L-One Systems, ebook: Making Digital Ideas a Success – Sourcing, Hacks and Funding Programs (GER)

News & Updates

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Connecting external software developers for efficient software development – Video (1:59 min.).