Captured Technology

Technology Startup Funding And Bootstrapping

Mar 06 2014

Business as Usual - Ewan Semple

Business as Usual - Ewan Semple (Photo credit: CannedTuna)

The funding for startup or new technology firms became more or less non-existent after the internet dot com failure/crash in 2000. The fact that quite a lot of tech startups had to close down their businesses was a big historical lesson according to Allis, Ryan P. of The crash led to some serious instability in the market, and also left those who had wanted to start their own businesses, with no idea of how or where to get some technology startup funding for their businesses.

A recent report by CNBC however, stated that some venture capital companies/firms and angel investors are steadily funding some tech startups, with the hope of finding one or more of such businesses that may turn out successfully.

The report cited a university study (from UNH) that indicated that angel investments, which is typically provided by wealthy beneficiaries or venture capitalists increased in 2010 by 14% to $20.1 billions in total.

Even with this, a lot of startups are however self-funding their businesses to guard/protect themselves from the need to adapt to the possible demands of investors, and to also retain some sufficient levels of ownership.

The Basics Of Startups Funding

The four major types of startups funding are seed or angel financing/funding, Series A, bootstrapping and the love money, according to Ben Yoskovitz (a blogger).

Seed or angel financing is generally the most common and well-known type of funding. It includes some venture capital funding that is typically made available to new businesses from the start. The Series A type of funding/financing may be used in some specific next phase of a company's business development, after it may have (almost) used up its seed money and had established itself.

Love money are funds from family and friends, while bootstrapping is when a business owner uses his/her own finances to fund and start the business.

Choosing And/Or Deciding To Bootstrap

Kevin Hutchison with his business partners chose and opted to fund their tech startup business HMS, in 2006 by themselves. Self-funding provided Hutchison and his partners with the opportunity to understand their market and customers without using other people's money.

Kelvin's company received some seed money funding to develop its main product, 18 months after it was founded.

A Possible Path To Some Financial Stability

A bootstrapper, Joshua Hughes self-funded his business Digital Skratch without a loan.

Hughes started and self-funded some other businesses too with the proceeds from his successes. He acknowledges that although bootstrapping had worked for him, it may however not be ideal for bigger businesses, since they may need more capital or money than what self-funding/financing can provide.

Hughes and Hutchison emphasized the need for a sound and solid business plan and idea, without which a business cannot be successful, even with enough technology startup funding or financing.

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 Patrick Stevens
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