One of the key reasons that B2B tech startups fail to get off the ground is lack of financial support. So, if you’re a B2B tech startup with a great idea for a SaaS product, what options are available for startup funding?
Crowdfinance is becoming more popular as the idea of investing becomes more mainstream, along with the appetite to be an early adopter. With consumer crowdfunding you can sell your product or service up front, to ensure you have the demand before you create the supply. While investor crowdfunding is likely to raise larger amounts of money for tech startups in return for business equity.
Start up loans for B2B Tech Startups
The Start Up Loans programme is a government funded unsecured personal loan programme through which startups can apply for up to £25,000 per business partner, up to £100,000 maximum. The start up loans programme is designed to support businesses trading for less than two years, that have been unable to secure finance from other sources. Repayments can be made over a period of five years with interest fixed at 6% per year.
There are many business and startup incubator programmes in the UK, some of which give free space to startups, or access to networks and mentors, and even investment and financial support. You’ll find the majority in London, but they do span the rest of the UK too. Additionally, there are many accelerator programmes that specialise in supporting startups with investment, aiming to grow early-stage businesses in a short space of time exponentially. The programmes usually last from 90 days to a year and as well as offering capital also offer exposure and access to experienced networks.
With seed or angel investment, you are giving up some equity in your tech startup in exchange for financial backing from a high-worth individual (or group of individuals). This could be a one-off investment or an ongoing investment relationship. Angel investors are an option if your business offers a high-risk opportunity with the potential for a high return. Angel investors can be a more favourable option than other lenders if the investor can also provide access to markets or can mentor the business in addition to supplying funds to boost your B2B SaaS startup. However, there are also challenges to be considered with seed companies.
Venture capital is another form of private equity financing for tech startups. Generally, a venture capitalist pools money from investment companies, corporations and pension funds. As such, investment for tech startups is likely to be larger than that available from angels. A competitive industry, it is more suited to the fast-growing start-up businesses in low risk sectors. Venture capitalists (VCs) are very profit driven and will often be looking to recover their investment within five years.
There are many government grants for small businesses, each with its own requirements and criteria. The different forms include cash awards as well as free equipment and funded training. Many grants will require match funding from the business and will have a limited pool of funds, so apply early when a government grant scheme launches for a greater chance of success.
This is not an exhaustive list of all the ways in which a B2B tech startup can secure funds, and it’s important to note that there is no right or wrong path to take. Ultimately, you need to find the right fit for your business, taking into account your working culture and your future ambitions.
Integral to any funding route is a winning sales strategy for predictable revenue, giving founders and financial backers clarity and confidence.
Learn more about how Sales for Startups can help you craft and execute a startup sales strategy for success.