The pandemic and geoeconomic situation have had a significant impact on the fundraising process. In today’s market economy, the landscape to raise capital has changed and require new ways to interact between company and stakeholders. Technology is disrupting the way founders are fundraising, making it decentralized and frictionless. Together with sustainability these are some trends to keep up with!
Digital platforms for fundraising
The pandemic has had a structural impact on how startups fundraise. As a result, digital solutions will become popular among startups seeking investment.
With the pandemics impact on in-person interactions, online fundraising is expected to grow in popularity. This could include using digital platforms or simply reaching out to potential investors via email or social media.
More digital interaction does still require that the company can demonstrate a clear path to profitability and growth. Raising capital is one of the most difficult tasks for any startup. Investors are getting more and more selective, and they are looking for businesses that innovate and commercialize quickly, helping the business to keep reaching their long term goal.
Social media and impact investing sector will grow
Another key trend is the growing importance of social media in the networking and fundraising process. Platforms like Instagram, Linkedin and Twitter will provide new opportunities for businesses to connect with potential investors and increase awareness for their fundraising campaigns.
The reason why social networks are so powerful is that they make it easier to create a dialogue and expand the amount of members in a network. This creates an opportunity for an extended information exchange and stakeholder attraction in relevant areas.
It is also worth noting that the impact investing sector is expected to grow significantly. This type of investment focuses on making a positive social or environmental impact, as well as financial returns. This could be a key area of opportunity for businesses seeking investment in the coming year.
How to raise money for early stage companies
Fundraising is an important aspect of business, and it is crucial for both investors and entrepreneurs to stay in tune with the changing environment. It is also important to have a strategy adapted to the company structure, business area and in which phase of the growth journey the company is. We have summarized common ways to raise money here:
Corporate Partnerships: More companies are beginning to see the value in partnering with startups. This can take the form of investment, but also simply providing mentorship, resources, or even office space. If your startup is working on a project that aligns with a larger company's mission, pursuing a partnership could be a good way to secure funding.
Equity Financing: Equity financing is when a company sells shares to investors. This can be a good option for companies that are looking to raise a lot of money quickly. The downside of equity financing is that you will have to give up a portion of ownership of your company, and if the company does not do well, the investors can lose their money.
Initial Public Offerings (IPOs): Although they have been somewhat overshadowed in recent years by the rise of unicorns, IPOs are still a viable option for companies looking to raise capital. In an IPO, a company sells shares to public investors. This can be a great way to generate a lot of buzz and interest in your company, but it also comes with a lot of regulatory hoops to jump through.
Debt Financing: Debt financing is when a company borrows money from a bank or other financial institution. This can be a good option for companies that are looking to raise money without giving up equity. It can also suit companies that have already established themselves and have strong credit scores. The downside of debt financing is that you will have to make regular payments on the loan, and if you default on the loan, the bank can come after your assets.
Crowdfunding: Crowdfunding is when a company raises money from a large number of people. This can be a good option for companies that are looking to raise money quickly. The downside of crowdfunding is that you will have to give up a portion of ownership of your company, and if the company does not do well, the investors can lose their money.
Sircular builds a collaborative startup ecosystem, where interaction and sharing are essential parts of the growth journey for both startups, accelerators and investors.
Information sharing and matchmaking between stakeholders must be easy and efficient in an ever changing market climate.