5. Things To Know About Getting Your Innovation Funding
Every single company, from your favourite restaurant to multinational giants like Amazon or Alphabet Inc., began with a great idea. You’ve no doubt had one or two nuggets of brilliance that have made you think, “Hey, I could market that.” But more often than not, the thought is gone as quickly as it came. And the reasons for this are valid: It would take too much time and money. You don’t have the expertise. You wouldn’t know where to start. But consider the founder’s stories you’ve heard. They all start with an idea, a “what if…” and they found a way. That could be you, too.
If there’s an idea that pops into your mind over and over again, that just won’t leave you alone, there’s something there. It doesn’t matter what it is, really; it could be an idea for a niche mom-and-pop business, or something that you imagine growing into a global industry leader. Put your thoughts on paper. Add as much detail as you can. Research, talk to people, start working out the steps for how to make the innovation come to life. The more you can imagine it taking shape, the more passionate you will become and the easier it will be to believe you can make it happen.
We know what you’re thinking: Imagining it doesn’t make it so. Everything takes time, expertise and money. And you’re not wrong. But the old adage is true — if there’s a will, there’s a way. And one of the ways to kill a couple of birds with one stone is to look into an angel investor or, once your company has a foundation in place, venture capital funding.
An angel investment is an infusion of funding that usually comes from a high-net-worth individual. They often use their own money to offer financial support to a burgeoning company, and in exchange, they usually retain an equity stake in the business. There are stories of angel investors fronting the money for startups that aren’t even off the ground yet, if they find the idea compelling enough. Depending on the terms of the investment, the angel can be involved as little or as much as they want.
Venture capital, on the other hand, is financial support that comes from professionally managed funds with various points of view. To obtain venture capital funding, companies usually have to demonstrate viability. Venture capitalists (VCs) look for companies with strong management teams in place, a sustainable potential market, and a unique product or service. They usually become partial owners of a company in exchange for their investment, and they can take an active role in the business.
People often think of Silicon Valley, and of companies like Facebook and LinkedIn, when they think of venture capital funding, but venture capital can support companies big and small, early-stage and late-stage. We spoke to Aashna Kumar, an associate at Generation Ventures, the venture capital arm of a broader family office called Generation Capital, to get her advice for budding business owners who are looking to get an innovation funded.
- Successful companies have a founder to believe in.
“We’re people-first investors,” says Kumar. “Before we even consider the idea, we ask ourselves, who are we backing? Do we believe this is a person we want to engage with and cheer on?” Kumar jokes that the average venture investment is seven to 10 years, which is around the average length of a marriage. As a founder, you should be flexible, open-minded and passionate. Your dedication should also be abundantly clear, and you should know your company inside and out.
2. Know how your company is innovative and be able to encapsulate it.
At Generation Ventures, they look for ways in which companies are addressing a quantifiable pain point, or changing things for the better. They also place an emphasis on digitization and improving processes. “At the end of the day, we look for great people tackling important problems,” says Kumar. Know exactly how your company is innovative and be prepared to explain it succinctly and meaningfully.
3. Understand that venture capital investments aren’t just about money. It’s a partnership.
“Venture capital is the most expensive capital out there,” says Kumar. “You’re not just paying for the money, you’re paying for the value and resources that your investors
bring to the table.” This could mean hands-on guidance on things like business models and talent acquisition, and involvement in bigger strategic decisions, too. “Founders should think of VCs as partners, to make it worth their while,” says Kumar.
4. Get to know your investor.
Just as VCs want to partner with great founders, founders should feel the same about their potential investors. “Any founder who is considering working with a particular investor should seek to understand that investor’s core principles and approach to partnership,” says Kumar. “Trust your gut, but also ask around —
speak to trusted friends or colleagues who have had encounters with them,
to get a better sense.”
5. Be fearless.
“Every single idea deserves to be heard, and every idea has the potential to be backed,” says Kumar. “There’s no such thing as not being good enough for venture capital as long as you’re building a healthy business you’re excited and passionate about.” If you want some support before you dive into the world of venture capital, look for resources. Kumar volunteers as the lead on Startup Boost, a not-for-profit pre-accelerator for MVP-stage startups in Toronto, which is a free resource for anyone in early-stage business development. “It’s a lot easier for founders to grow and get funding when they know other people who have been through it,” says Kumar. “We try to take the pressure off of founders, to show them that they don’t have to be afraid to try.”