Startup Science: 10 Startup Funding Sources

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  1. Self funding. Unfortunately the first round of funding must often come from the entrepreneurs. Unless you have a strong track record of founding successful startups, you will need to develop your product or concept before someone else is willing to invest in it. 
  2. Friends and family. It’s a natural response to ask your friends and family for help but it is important to treat this like any other funding round. Only take money from people who can afford to lose it, know your legal requirements, and offer F&F investors a return on their investment such as equity, shares or interest.
  3. Grants. In the US the Small business innovation research (SBIR) grants and Small business technology transfer (STTR) grants are designed to offer capital to early stage innovative companies in the healthcare space. A major benefit of grants is that they are non-dilutive funding ie you do not have to give up any equity in exchange for the cash.
  4. Crowdfunding. Crowdfunding platforms have exploded in popularity and some, like Experiment, are dedicated to funding science-based projects and companies. However, to be successful you need to offer an incentive like an innovative product to people who help fund your campaign.  
  5. University funds. Many universities now have their own funds for investing in in-house technologies in exchange for equity.
  6. Incubators and accelerators. There are over 400 incubators and accelerators in the US alone. Some have been developed by big pharma but many are independent and many offer funding packages to entrepreneurs in exchange for equity.
  7. Angel investors. Angel investors typically invest smaller amounts of money at an earlier stage than venture capital investors. They invest in exchange for equity, often in the form of a convertible note. You can find Angel investors on AngelList or contact organizations like Tech Coast Angels.
  8. Venture capital. While VCs may invest in the seed round, they usually invest at the Series A round or later and are typically not interested in deals under $1 million.
  9. Philanthropy. If you are developing a novel treatment for a specific disease, you may be able to apply for funding from a philanthropic organization like the Bill and Melinda Gates Foundation or the Michael J Fox Foundation for Parkinson’s Research.
  10. Big Pharma Partnership. Many big pharma companies are now exploring external development partnerships. They will offer funding to early stage companies based on milestones in exchange for rights to either acquire or market the technology.

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