10 Ways to Fund Your R&D Start-Up
When you think of beginning your startup journey, one of the first things you think about is the funding. Here are some options to consider for funding your startup:
1. Personal savings
The money you have saved up in your bank account could be a source of funds for your research in your start-up. It is a no strings attached way to get your R&D underway. While it is a safe way to start your project, it may not be the best option. The cost of the research could turn out to be greater than what was saved and having no other backup may hurt the project.
Bootstrapping is building a company from the ground up with nothing but personal savings and the cash coming in from the first sales. The term is also used as a noun: A bootstrap is a business an entrepreneur with little or no outside cash or other support launches. It is a tough way to go. The entrepreneur has to carry all the financial risks. Limited sources can hinder growth, prevent promotion and even undermine the quality of the research envisioned.
3. Family and Friends
You can also reach out to your family and friends to help fund your R&D project. In some cases, borrowing from close ones may have more relaxed terms and conditions.
4. Accelerators and Incubators
Accelerators usually begin with a rigorous application process. Typically, the accepted companies have already demonstrated fast growth and a minimum viable product (MVP). They’re often given a small seed investment and paired with mentors from the accelerator’s vast network. The goal of the accelerator is primarily networking, mentorship, and resource allocation to skyrocket the success of proven business ideas.
If you’re looking for capital to grow your business, an accelerator might be a better option. Incubators focus on preparing the entrepreneur or founder with the business model, plan, and mentorship necessary to confidently pitch their finished business plan to investors.
5. Crowdfunding Crowdfunding is the borrowing of small amounts of capital from a large number of investors to finance a new business venture. It has created the opportunity for entrepreneurs to raise hundreds of millions from anyone with money to invest. Crowdfunding websites such as Kickstarter and Indiegogo attract many people hoping to invest in the next big business. This could be a great way to fund your startup. 6. Grants Research local initiatives that benefit businesses. Locate federal sources of sustainable business grants. Sustainability has been an important government concern and seems likely to remain at the forefront of policy decisions for the foreseeable future. Apply for any sustainable business grant for which your company is eligible. The typical process to apply for a business grant is by providing information about your business and explaining what you would like to do with the grant money. You will most likely have to provide some financial information and sign a contract that requires you to use the money for its intended purpose. 7. Angel Investors Angel investors can help you raise required funds for your research in exchange for a return on investment. You will need to prepare an effective business plan detailing your initiative. It is advisable to have your finances in order as well as having your management team in order to be able to get funds from the angel investor. 8. Venture Capital Funds Enlist the help of venture capital fund companies, which often finance R&D programs of high-risk and early stage start-up businesses. To get funding from a venture capitalist, you will have to create a short and concise business plan that details the amount of funds that you require. A venture capitalist may ask you questions, such as your business experience, present market trends, why your business has a potential for high growth and how your R&D will affect future sales. It would be helpful if you do your research beforehand. 9. Convertible Note This is a great way to raise funds for your R&D project. Convertible notes is a short-term debt that can turn into equity, typically with another future financing round. Investors would loan you the money needed for the project and in return they would be given equity of the startup instead of paying the money back with interest. 10. Loans Banks and other financial institutions have been a long-standing source of help for funding various initiatives. Apply for a loan at your local bank or financial institute to fund your research. All of these can be leveraged with the SR&ED program to get more R&D dollars for the investment made! It is essential to know what qualifies and how to track and measure outcomes to enable you to be able to claim.