Knowledge Based Financing for Start-ups
The biggest challenge to the innovative people and brilliant minds is how they can grow their new companies. Central to that question is the issue of sourcing for funds that would provide for operational needs and marketing channels. For start-up founders to tap into the potential of their businesses they need a precise guide on smart financing options.
Canada’s model of financing start-ups is largely grounded in the use of investor funds. In Ontario alone, there are about 15 angel investor organizations providing seed capital to small growing companies. The angel investor groups accept pitches from firms seeking funding, conduct a review of the financials and make a decision on lending. To ensure transparency and even the dissemination of information across industry player, the private sector and government have set out reviews on the angel investor companies.
Information is at the core of establishing a successful business. For young companies, access to organizations that advocate for their cause and look for their interest would go a long way in providing information driven decision. One of the most key organizations to Canadian start-ups should be Canada’s venture Capital Association (CVCA).
Canada’s venture Capital Association (CVCA) is the information pool for industry players in Canada’s equity and venture capital market. The organization seeks to bridge the information deficiency gap between start-up founders and investors. Additionally, it advocates on behalf of the industry players to government of formulation of policies that support entrepreneurial growth in Canada. Since CVCA brings together Canada’s venture capital, private equity and angel investment firms, its database would be an invaluable resource to an entrepreneur’s toolkit.
Investor financing broadly falls into either venture capital or angel investing. Both of these options share one concept, private equity. It means that for both financing options, the firms providing capital will earn a portion of the start-ups shares in exchange for providing funding. As to the differences, angel investors are often individual business people putting their own money into start-ups with potentials for growth. Venture capital firms, however, are firms and not individuals that tap into their pool of funds from clients to finance start-up companies.
Founders may be unsettled over which option to take for their companies. Generally speaking, business angel investors would be ideal for start-ups that require relatively lower amounts of capital and are at their infancy stage. This choice of start-up groups to fund is as a result of the availability of funds of a single investor relative to that of a firm that pools a number of investor funds together, venture capital. The investors may either decide to be directly involved in the company’s operations or take a hands-off approach only coming in on the major decision.
Venture capital firms often target start-ups with proven concepts and revenue streams. Based on those two, among other facts, they then provide capital geared towards scaling the start-up for more revenues and greater market access. The companies would often require a seat on the start-ups board to oversee business decisions and provide guidance on best approaches.
The bottom line for start-up founders is business decisions, especially on funding should be knowledge driven. The synergy between an information driven start-up and human skills for the start-ups is central to propelling young companies to established company brands.