Whatever line of business you may be looking to get into, you should always be ready with a business venture funding funnel that has the ability to take advantage of any funding opportunity that comes your way. This doesn’t mean you should jump into bed with any potential investor that shows an interest, but rather that should it make sense to take up the type of funding you’re presented with, you are ready to complete all the due diligence to land that funding.
Having said that, what are the different types of funding you could be in on?
Business development grants
A grant is probably the best form of business venture funding you could get, because in the pure essence of what it means to get a grant, you won’t have to pay the money back. Usually grants are given by governments or government affiliated organisations, such as the research and development grants many companies getting into CBD products get.
The best part of this is that often if the R&D yields a successful, commercially viable product or service, the government then purchases that product in great quantities for distribution among its citizens.
Angel investors will often want some kind of percentage stake in the business venture they’re effectively investing in, but that shouldn’t deter any visionary entrepreneur who believes in their proposed venture as much as an angel investor appears to. If an angel investor sees potential then you best believe there is indeed some potential.
Here’s where it gets a little more interesting…
Sometimes governments don’t go on to give R&D grants to ventures with some real potential, but that’s mainly for political reasons. The good news is that angel investors often sniff around the applicants of government R&D grants, going on to partner up with the applicants whose proposals show real promise. Not to say that was the case with this particular example, but this is how the likes of Orange County CBD, as a retailer of CBD products, go on to dominate the same CBD market that the government might have allocated funding to someone else who didn’t go on to yield quality, commercially viable products.
So apply for a grant if you can, but if you don’t get it, don’t be afraid to mention that to a potential angel investor who shows interest in your venture.
Venture capital funding
Venture capital funding can sometimes be used interchangeably with angel investment, except in many instances VC money comes from an entire venture capital firm. Otherwise it’s pretty much more of the same as angel investment – investment in your venture in return for equity. You might just get a lot more money from a VC firm than an angel investor though.
Bootstrapping refers to going ahead with the construction of your business venture and using whatever money the minimum viable product or service offered can bring in. A classic example is how an internet platform venture gives equity to a team of software engineers who work on the project without immediate remuneration, perhaps moonlighting to cover the daily living expenses.