Starting, Incubating and Funding a Startup
Potential for growth is one of the defining elements of a startup. And that potential comes from identifying and introducing a fresh solution to a common need – even if your market doesn’t yet realize that it has that need.
The concept behind a startup doesn’t have to be original. It just has to introduce enough innovations to an existing idea to make that idea truly useful and practical.
Think Amazon or Facebook or Uber. Few realized that they were the solution to a problem until they actually existed. Now, they’ve become part of our lives.
If you believe you have an innovative idea – whether it’s a new way of bringing people together or an app for math-impaired neighborhood entrepreneurs – then you may just have what it takes to launch a startup.
You have the idea, now what?
You need to be bold enough to pursue your startup dreams.
- As any successful startup will tell you, it’s not going to be easy. Unless you’re very lucky, breakthroughs will come slowly and you will have your share of disappointments.
- You will need to watch every cent you spend to ensure your venture’s survival until it takes off. You need to be totally committed to the start-up lifestyle. And you will need a lot of support.
Get the Funding
Funding for start-ups can come from several sources:
- Your own pocket, or those of friends and family
- Angel investors
- Venture capitalists
- Incubators or seed funding firms
Who are angel investors?
Angel investors are typically rich individuals who are constantly looking to invest in promising startups at their earliest stages. This allows them to buy shares in the business at very low costs, with the aim of making a large profit when the business takes off, goes public, or is sold to or acquired by big companies.
- The best way to meet angel investors is through networks and personal contacts. Emailing your project proposal may not gain you much traction if you haven’t met the angel personally or know someone who knows the angel.
- Many angels form a group or a syndicate to pool their investment money, and hold events which get them in contact with startups.
- Incubators may also introduce startups to angels and angels may also refer startups to incubators.
Who are VCs?
Venture capitalists are similar to angels except in a few important details:
- They are companies, not individuals, and operate using funds from various investors
- They offer funding at a later stage, typically when a startup is demo-ready and has acquired some users or customers
- They often offer the largest funding and tend to be more exacting in choosing a startup
Because they’re investing a large amount in your venture, VCs will want more control, perhaps not so much in the way things are run (if things are going smoothly) but mostly in matters related to finances and capitalization breakdown.
- As with angels, venture capitalists can be elusive and the only way to connect with one is through a network or through someone you know.
- In many cases, angels or incubators introduce startups to venture capitalists.
Who are incubators?
Incubators can connect you to both angels and venture capitalists.
Incubators are investors too and are also called seed funding firms, but often, their monetary investments are not as large as a VC’s or an angel’s. The role of incubators goes beyond mere outright funding.
- One of the biggest differences between an angel investor and an incubator is that incubators offer support and seed funding even at the stage when the startup has nothing more to show than just an idea.
- Incubators then help nurture that idea until it is ready for the attention of angels or VC’s.
- To get to that point, incubators offer training and mentoring that are more intensive and structured than what angel investors provide.
- Additionally, incubators provide startups with workspace as well as the tools and infrastructure needed to accelerate growth.