Having gone through the process of seeking start-up financing as a student entrepreneur, I am thrilled to share my insights and lessons with you. In this guide, we will look at the various ways through which a student can raise capital and the type of knowledge and tools required by you to foster the financing of your startup.
University Grants and Competitions
Most educational centers provide specific financing options for students for launching their ventures and organize startup competitions where students make the pitch to get the fund.
Pros:
- Non-dilutive funding (you don’t give up equity)
- Tailored for students
- Often comes with mentorship and resources
Cons:
- Typically, you may receive a smaller amount of money
- The competition is very fierce
- Guidelines of the competition can be strict or have a lot of requirements
How to Apply:
- First and foremost, check with the office of your campus that deals with ventures and innovation for available grants and competitions
- Study the terms and time period required for the application and become eligible
- Make a strong pitch if you have a business plan
- Fill in your application and keep tabs on it if needed
In my college life, I took part in the annual live contest for start-up plans at my university. I introduced my educational technology franchise idea snd got $10,000 in seeds money. At first, this seed money enabled our prototype to be made and concept prototyped.
Crowdfunding
Web portals like Kickstarter, Indiegogo enable entrepreneurs to take the funds they need, from people who are eager to back them up.
Pros:
- Getting in touch with a wide audience
- Your product/service is validated by the users
- The possibility of a viral marketing campaign
Cons:
- The process of creating and controlling the time is very time-consuming
- The probability of not meeting the projected goal of the investment
- Some platforms charge big fees
How to Launch a Successful Campaign:
- Choose the right platform for your project
- Identify the real milestones and set a time frame for collecting funds
- Create material that is engaging like video
- Ensure that you give backers something from their end
- Advertise via your social media platforms and other online venues
- Interact regularly with your backers during the month
A fellow student entrepreneur I was mentoring was able to raise $50,000 in Kickstarter for her project of making a sustainable fashion brand. The successful launch was mainly due to a well-prepared video pitch and strategic use of social media influencers to gain a high level of popularity for the crowdfunding campaign.
Angel Investors
Angels are individuals who have the money and are willing to invest it in startups in return for a share in the company and are usually affluent.
Pros:
- Probability of getting larger sums of money
- As well as contacts and knowledge
- Getting in on more adaptable terms than that of venture capital
Cons:
- Having to give up equity in your organization
- A potential loss of some control
- The financial backer will expect you to make sure your business plan works
How to Attract Angel Investors:
- Formulate a solid business plan and the projected financial scenario
- Prepare a pitch with great visual presentation
- Involve yourself in events that are specifically for startups and networking
- Use platforms such as AngelList to communicate with prospective investors
- Assure the investors that you are all set to follow the line, you possess significant market potential, and you have an effective growth strategy
In the junior year, I got the chance to pitch in front of an angel investor who invested $100,000 in a startup that experienced steady growth over time. This investor not only provided funding but also introduced me to several key industry contacts and his/her guidance tremendously helped us push the envelope.
Incubators and Accelerators
These types of programs are designed to give the startup companies support, typically in the form of resources, mentorship, and sometimes financing, in exchange for part of their company.
Pros:
- A well-structured program with experienced mentorship
- Access to an investor network and the industry professionals
- Often they provide free office space and other resources
Cons:
- Restricted entry because of the popularity of the program
- It may involve transfer to a new area
- It makes total equity over to accelerator or incubator
How to Apply:
- Focus upon the accelerators that are involved in your area of technology and have programs for startups at your level of development
- Viable application materials such as business plans and pitching presentations are to be prepared quite decently
- Always have a rehearsal rehearsal of your presentation and an interview during the application process
- You must show the driving force and that you have the potential to grow
After I graduated, I applied to a reputable accelerator program. We were admitted and received $150,000 in seed funding along with an extensive three-month mentorship program. The acceleration was concluded by a demo day on which we presented to a room full of prospect investors which spun off more rounds of fund raising.
Government Grants and Programs
It is a common practice for many countries to offer subsidies and programs which support youth enterprises and promote innovation.
Pros:
- Non-dilutive funding
- A grant that could be very vast in number
- Often provides additional help and resources
Cons:
- The application process can be time-consuming and complicated.
- May have strict requirements for documenting
- Subsidies may be hitched to specific milestones or goals
How to Apply:
- Find a grant or programs that are available in your country or region
- Be honest in checking review requirements and application processes to be sure you meet the qualifications
- Write comprehensive details of your plan and the budget to accompany it
- Submit your application not too close to the final date
- Be prepared for a pretty long and complex review process
A friend of mine was the sole proprietor of a state-of-the-art startup that received the sum of $75,000 from our state’s innovation fund. The funds were to be used for the development of clean energy technology. It was not only the money that motivated her but also, the industry professionals who provided her with valuable business advice.
Balancing Entrepreneurship with Academic Responsibilities
It is important for the student entrepreneur to master the art of utilising time effectively. Here are some recommendations I personally liked:
- Place applicable tasks and create a timeline schedule
- Communication with professors about the enterprise is primary
- Exploit class work to build your business (e.g., build your companies using class projects)
- Establish a network of friends who may help in both types of assignments, business and academic
- Avail yourself of the university’s startup offices and mentorship programs
Legal and Financial Considerations
The application of resources is the most important factor when it comes to seeking money. Here are some legal and financial tips to consider:
- Completely go over the agreement terms with the investment or the funding agency prior to contracting
- Think of setting up your business as a way to keep your personal possessions out of the liability zone
- Also, be careful about bookkeeping and take advice from professionals on a case-by-case basis
- Conduct a research beforehand about tax monetary items of the potential investor
- Through proper patents, trademarks, and copyright, protection of your intellectual properties should take place when required
Building a Strong Support Network
The creation of a robust support community is a very important element of success. Here is how I established mine:
- Join in on the networking and meet-ups
- Ask to be a member of the entrepreneurship community at the college.
- Find some Great Guides in your industry
- Take part in forums and discussions with the startup community online
- Establish relationships among faculty and alumni in relevant areas
Market Research and Validation
A fundraising campaign should never be started before proving the concept has viability. These all are the processes involved in:
- Perform a complete investigation of the market and gain insights about your prospective client and your competitors
- First of all, decide on the minimal version of the product and then test its functionality on the market
- Collect all the feedback you can about your product or service and then make it even better
- Using the numbers as a trust factor that will convince potential investors
Financial Planning and Budget Management
Managing finances is part and parcel of startup success. Here are some of the financial management resources and tools to consider:
- For the financial records, one can use the financial tracking tool like Quickbooks or Wave
- You can use planning tools like LivePlan to create a comprehensive and detailed financial projection
- Get support from the finance professors at universities or SCORE mentors near the location
- Go to classes on startups financial management
FAQ for Student Entrepreneurs
Q: How much equity should I give up for funding?
A: It will all depend on different situations, but one important point is you should aim to let go less than 20% of it to the first investors/angels.
Q: Can I run a startup while still in school?
A: Yes, it’s possible through time management and multitasking. Some successful enterprises were started by students.
Q: How do I protect my idea when pitching to investors?
A: An option is an agreement where the party reveals the idea to the other party, would be a non-disclosure agreement (NDA), however, a word of caution, many investors do not sign such agreements, so instead, focus on execution.
Q: What if I can’t secure funding?
A: You should think of starting the process of \x93bootstrapping\x94 your business, which is mainly about prioritizing income generation from the start. A significant amount of prosperous firms were launched without any outside funding.
Final Words
Starting a business from scratch as a student entrepreneur may be a difficult thing to accomplish, but with effective usage of university resources, exploration of various funding options, and building a strong network, you can heighten the chances of the success down the road. Always take the time to validate your idea, streamline your schedule, and embrace learning and adaptation. Intensify time management skills and use creativity to invent a successful startup!
