How Can Students Fund Their Tech Startups?

Jeffrey Wagner
June 1, 2018
271 Views

We’ve all seen the newspaper headlines regarding student debt in the UK, with stories referring to recent graduates who are apparently £50,000 or more in debt.

This is largely a meaningless figure, however, as the key consideration is how much of this will actually be repaid once an individual has entered the world of work, one thing that few people take into account.

Despite this, there’s no doubt that students and new graduates can struggle financially, particularly when they want to consider launching a tech start-up. With this in mind, here are some of the key funding options that should be considered:

  • Friend and Family Loans

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For some students, accessing funding through friends and loved ones remains one of the most viable options.

While this may seem unpalatable to some, of course, it can be perfectly workable so long as all parties maintain open lines of communication and share a common understanding. The big advantage in this case is that family members and friends are much more understanding than banks. In some cases it is even possible that money is offered without an attached interest.

To achieve this, try to market your proposition clearly and establish a fixed and mutually-agreeable repayment schedule. In short, approach the loan as you would any commercial borrowing agreement and strive to settle your debt as quickly and as efficiently as possible.

  • Short-term, Unsecured Lending

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It’s fair to say that not all tech startups are created equal, although most are bound by the fact that they’ll require significant funding to become fully realised.

In some cases, however, you may benefit from separating the project into phases, starting with market research and the funding of any intellectual property protection. This will require relatively minimal funding, and enable you to pursue low value, unsecured loans from service providers such as Smart-Pig. After all, these types of firms have tailored their loans to suit students, while they offer competitive rates and flexible repayment options.

These loans also created short-term cycles of debt, which allow you to fund the formative stages of your business and quickly repay your liability. The big advantage with this option is that you do not end up in too much debt as the tech start-up gets up and running. You can also quickly stop investing if you see that the company does not work out.

  • Equity Crowdfunding

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Occasionally, you may develop a tech startup that is highly innovative and boasts incredible commercial potential. Investors are perennially interested in this type of startup, making it easier to access significant funding that can drive your venture’s growth.

The best way to source such an investment is to seek out equity crowdfunding, through which your market your proposition to private investors in exchange for an equity share in your venture. This helps you to directly leverage the potential of your business, while also accessing the knowledge and expertise of seasoned professionals.

Sure, this will require to sacrifice some of the equity in your business, but this should be considered in line with the potential returns and your businesses future scope for growth.

 

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