This quest for the most appropriate form of financing can quickly become mission impossible given that every source of financing must be assessed and selected based on your start-up’s maturity. In a jungle of options, each form of financing is suited to one or several stages of a start-up’s life cycle.
Start-up creation (problem-solution fit)?
The aim of this stage is to first and foremost validate your idea, develop a first product, and put together a team to then create your business. This crucial moment is problematic for many start-ups who encounter a frequent difficulty: identifying early advisors, the ones that will help them get a foot on the ladder.
There are different forms of help and support, provided by incubators, accelerators and financers (public or private) that help with the start-up process by offering advice, support, grants and personal loans. Local institutions like Regional organisations can in particular provide an expert team to offer custom advice or a financing fund suited to the needs of a start-up in its early days. BPI France, a public bank, also supports start-ups from idea to market, with loans, credits or insurance, and provides a search engine to find the right loan solution.
Commercial launch (product-market fit)?
After an initial successful experimental stage, during which the product’s positioning and attractiveness has been tested, and first sales revenue generated, you now need to move on to the product’s commercialisation or acceleration. This is a crucial stage aimed at finding the business model best-suited to both the market and demand, based on what you learned from the initial incubation phases as well as advice from mentors who have already faced the trials and tribulations of entrepreneurship.
So this stage requires significant financial resources (sales, marketing, communication, etc.) to successfully enter the market. Several organisations offer financial resources to start-ups with a commercial concept (initial turnover, first contracts, etc.) or at least initial client validation. This is the case of Wiseed, the public crowdfunding platform, or regional investment funds such as IRDI in South-West France.
When there’s chemistry between product and market, the growth curve takes off. Now we need to raise awareness of the product on a wider scale, or even internationally. This is when the components of the business model are sustainably structured.
During this final stage, which ensures the sustainability of the business model, organisations like Indosuez will give you the opportunity to get in touch with business angels and other successful start-ups to share the best practice needed to reach the next level of your growth. If you’re dreaming of going international, accelerators operating overseas can be precious allies and help you establish a presence in foreign countries by lending you domestically-sourced funds, which is always a good argument when meeting contacts there.
One example of this is Inovexus, based in San Francisco, which provides funding to promote development in the US. Start-up financing remains closely linked to where businesses are based but is structured in roughly the same way everywhere, including governmental organisations, regional organisations, local initiatives, ICC (the international chamber of commerce), banks, funds, etc. All these stakeholders agree that what counts most is not the idea but rather the execution, and to pull this off, you need to:
- First and foremost put together a team;
- Enter the market as quickly as possible (Go-to-market);
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- Prepare properly because there’s only a fifty-fifty chance of convincing an investor;
- Get support to bring your idea to fruition and also reinsure investors.