A food startup does not yet have a proven track record, revenues, or profits to use as self-funding resources. They’re funding is often going to come from several different places. The money is used to get the business up off the ground, fund general startup costs, and ensure an organization isn’t paralyzed coming out of the gate due to a lack of available budget.
Here are some ideas on how to fund a startup in the food industry. We’ll explore all the financing opportunities available.
1. Bank Loans
The bank is the first place a startup may consider looking for funding. A bank loan isn’t given to just anyone. They’re only provided to businesses that have sufficient fundamentals backing them, a business plan, and collateral. Do shop around when getting a bank loan, as terms vary. Also, expect loans to be hard to access if you’re a startup without an established track record.
2. Government Grants
You don’t need to pay back a government grant. It’s not a loan! Several government agencies offer grants to startups. The best example is the SR&ED program which is tailored to innovation and R&D projects. Grants exist at the federal, and provincial level Canada-wide for specific projects. There could be thousands in funding available to you. Discuss with a professional agency like G6 Consulting to help you with SRED applications.
3. Bootstrapping
In entrepreneur speak, ‘bootstrapping’ refers to an individual who builds a company from personal finances. That is, to avoid looking for an outside investment with as minimal external capital as possible. When entrepreneurs get this money from personal savings, credit cards, and lines of credit, they have it available.
4. Family and Friends
Borrowing from family and friends is a risk. Your family and friends may not have very much available capital, to begin with, and may request equity in your business which is a fair request, by the way, and the relationship can sour if something goes wrong and you can’t repay the loan. Consider taking money from a spouse, parent, family, or friend.
5. Crowdfunding
Launch a crowdfunding campaign if your type of startup lends itself to it. Solicit funds from small investors in exchange for rewards or equity. Anyone can do crowdfunding after creating a campaign and spreading the word on social media and marketing channels. This type of funding is best suited when launching a specific product, service, or project that needs financing.
6. Angel Investor
You may seek an angel investor to help fund your startup business. An angel investor is a wealthy individual who will invest their money into your company in exchange for equity. They’re generally retirees or individuals with experience, contacts, and knowledge that can help elevate your business, willing to invest amounts ranging from $25,000 to $100,000 at the early stages.
7. Venture Capitalist
If you need more capital than what’s offered above, go to a venture capitalist willing to make larger investments. Most venture capitalists seek tech-driven, trendy, easy-to-scale businesses with high-growth potential. Like angel investors, venture capitalists do take equity for their funding. Consider startup funding alternatives if giving away a lot of equity isn’t in your business plan.
8. Incubators
Joining a business incubator is an option for businesses in fields like biotech, information technology, multimedia, or industrial tech. An incubator supports new businesses, inviting them to share their premises and resources in administration, logistics, and technology in exchange for a sum. Incubators generally take on startups for up to two years and have proven to be very successful at launching companies the right way.
9. Barter with Partners
When we talk funding, we’re talking about cash and numbers. Sometimes, bartering and trading services may also benefit your business and help fund your business differently. If you have partners or clients willing, consider trading your services free to them in exchange for something you need, whether IT support, advertising, marketing, materials, or something else.
10. Licensing An Asset
If you’re building a company around a specific technology, product, service, or asset, you might want to consider licensing it to a third party to reap the revenues. While licensing isn’t ideal for all companies, it’s helpful to know that the option exists if you need to. If the licensing is particularly successful, the revenue generated can provide significant funding and may be all you need to get your brand off on the right foot.
11. Strategic Partnerships
Just like you might give away equity to a venture capitalist or angel investor when you form a strategic partnership, you are partnering with a larger company to access their resources and help. This will advance your company and get you off on the right foot. Startups can’t always make it alone. A strategic partnership is not a bad idea, and it’s very customizable to how you want the arrangement.
