Hello, I'm Natasha, a Teaching Fellow at Imperial College London. Let's together review the different types of funding that you could apply for. What ways can an entrepreneur be funded? Do any come to mind? Take one minute to write down some ideas. Funding is an essential part of creating an innovation. It is important to know the options that are available to you. Remember, each type of funding has its own advantages and disadvantages, but its important to be aware of them all. This allows you to weigh up their strengths and limitations, and decide which one or ones are the best for you. To start with, how many different ways did you think of in which an innovation could be funded? I bet you thought of lots of options. Compare your list with mine. Let's start with self-funding. Are you able to initially pay for your innovation? This allows you complete control over how your money is spent. But you may find you need more capital, so have to acquire further funding. How about friends and family? You could ask the people closest to you if they're willing to help you with a loan or investment. It allows you freedom to set terms with them, but it can be difficult if you are unable to pay the money back, you could damage your relationships. If you don't want to rely on the savings of the people closest to you or indeed your own, then what are the options? Well, grants are one thing you could apply for. These may be affiliated with government institutions, research councils, charities, or universities. The amount available can vary from only a few thousand to a couple million. Applying for grant funding can be time-consuming and complicated, and there is no guarantee that you'll be successful. However, there are a variety of opportunities available. We've created a list of grant examples you could apply for. Similar to grants but still separate are competitions, often called awards. These give you a chance to win cash prizes and some great PR for your innovation. These will depend upon your sector and setting. The process may be less complicated than applying for grants, and often the money available is lower, but it is worth exploring as an option. What about investors? You could ask a wealthy individual to provide capital for your innovation in exchange for a percentage of shareholding in your business. These people are often known as angel investors. This can be a quicker way of funding your innovation initially compared to applying for grants, but you are losing some control of your business. Did you think about venture capitalists? These are individuals or firms who invest in your innovation for a percentage of shareholding in your business. The difference between venture capitalists and angel investors is that venture capitalists tend not to invest their own money. In order to reduce the risk of losing their investment, they often invest into businesses that are already somewhat established, but they may invest a greater amount than angel investors. Again, this is a good way to raise money fairly quickly, but you are losing some control of your business. How about crowdfunding? Was this on your list? Crowdfunding is a way to raise money from lots of different people at once while you offer rewards based upon how much each individual invests. This is a relatively new way to obtain funding, and does require your marketing to be extremely successful to raise all the money required. Depending upon your situation, you could apply for loan. You'll then agree to pay it back likely with interest over a certain time period. Banks often are not keen to loan money to new businesses, so it can be difficult to fund in this way. It also means you'll be putting yourself immediately at risk of not being able to pay back the loan. Finally, what about credit cards? These are often not a great way to finance your innovation because of interest rates, and penalties. Using these has led many startup business to bankruptcy. Funding is an essential part of developing any innovation, but as you can see, there are array of different options available to you. I've given an overview of the main ways you could fund your business, you may choose one or multiple ways to acquire the necessary capital. Which ways are best suited to your situation? In this specialization, you are going to explore the strengths and weaknesses of these more in depth, which I hope will make your own decisions easier in the long run.
