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How to Grow Your Tech Business When VCs Refuse to Invest in It

How to Grow Your Tech Business When VCs Refuse to Invest in It

As a startup employee, I always wonder where my salary comes from and how our business grows before we start returning investments and growing on our own.

That’s why I got thrilled when Arto, the co-founder of 10Web and Krisp, shared some details about his startups’ main financial sources, aside from venture capitalists’ investments.

We all know how VCs’ (professional investors’) contribution can be vital. But there must be (and there are) other great sources that have helped us create what we have now. So here are the top 5 alternative sources:

  1. FFF
  2. Grants
  3. Credits from big cloud companies
  4. Revenue-based financing
  5. Bank loans

With no specific order, here we go.

1. FFF

fff - friends family fools

FFF stands for Friends, Family, and Fools. Of course, you can combine 2 of these components. I mean, you have to be a fool to invest in an idea with no other reason than that it belongs to a friend or a family member. Unless you don’t care about your investment which still makes you a fool.

But if the idea looks promising and you just happen to be close enough with its owner, then the risk is totally worth it.

And if you’re the entrepreneur who needs funding, there’s no bigger relief than having a rich family, friends, and well, fools to back you.

It’s not very likely that you’ll get all the investment you need from FFF, but at least you can get enough help to take your project to a point where VCs see more value in it.

There’s a guy who had a startup that turned out to be a foolish idea. But his best friend and the smartest person he knows believed in it enough to give it a chance and had invested $50k.

But whatever your relationship with a potential investor is, prepare a professional pitch as if you’re presenting to a VC.

However, there’s a downside to the FFF: if the business fails, it may affect your personal relationship, too. But on the other hand, you do believe in your idea and you do believe in your friends and family, right?

2. Grants

Grants

Free money! Who doesn’t want it? In some way, grants are better than most financial sources because you have no obligations to return it if you receive one.

You just have to present your business in the best way possible and if you qualify, you can just take your time and grow your business without additional stress. We all know that as an entrepreneur, you already have enough stress to deal with.

Grants are usually not that big, but again, they can be a firm basis for your confident first steps.

If you do your research well, you’ll find dozens of private and governmental grant programs. Most of them offer up to $50k in funds, but there are much bigger ones. Some funds distribute millions of dollars between the businesses of their choice.

We found a list of 105+ small business grants in Fundera’s blog. It’s mostly for the US-based businesses, but you easily find some for other regions as well.

For example, in Armenia, EIF, Hive Ventures, and Seaside Startup Summit provide the biggest grants. You should check the ones in your area as well.

And of course, you have to research international grants too.

3. Credits from big cloud companies

Credit from big clouds

If you’re starting a business in the tech industry, it’s most likely that one way or another, a crucial part of your startup will rely on tech solutions from big players like Google, MS, and Amazon. And they all have programs to support startups and grow with them.

Google Cloud offers up to $100k of credits! You just have to check the requirements and apply if you fit. All the details are here. The platform we’ve created here at 10Web includes managed hosting powered by Google Cloud, so you can guess how big of a help this program of Google was to us. Oh, and it comes with up to $600 for Google Maps APIs and a nice bonus of up to 10 free G Suite Basic accounts.

AWS (Amazon Web Services) also offers up to $100k in credits which were crucial for 10Web as well. Here you can find all the details about the benefits of the Amazon Activate program.

And there’s a program called Microsoft for Startups with the biggest free credit: up to $120k for Azure Cloud for two years! Here’s where you can get all the details.

The $100k-$120k credits that I mentioned are for qualified startups only, but all three of these companies also provide just any startup with smaller credits with easier access.

4. Revenue-based financing

Revenue-based financing

RBF (revenue-based financing) is a relatively new funding model for small businesses.

It has an advantage over bank loans: it doesn’t require the founder’s personal assets, so you can feel safer.

And there’s an advantage over angel investments and venture capital: you don’t lose ownership equity, and the investor doesn’t usually require a seat on the board of directors. Instead, you just give them an equity warrant or return the investment itself.

RBF investors mostly work for startups with over $10k of monthly revenue. The bigger the revenue, the bigger the investment, hence the name.

Arto recommends applying to Corl and LighterCapital for an investment.

5. Bank loans

Bank loans

Of course, all the other options mentioned above look much better and way safer than bank loans. For small business loans, the founder’s personal assets are usually at stake. And with a yearly startup failure rate of about 50% varying slightly from source to source, the risk might be too big for you to take.

But there are actually small loans with lower risk. For example, if you want a loan equal to a few months’ revenue of your business, you can find one with 4-8% annual interest and company stocks as a guarantee.

Some say that bank loans are too outdated for a tech startup. But if you believe in your idea and in your team (and no other option is available for now), this is a risk worth taking, isn’t it?

Whichever type of investment you apply for, make sure to prepare a knockout pitch. And, of course, don’t rely on the idea alone. No startup has ever succeeded without wise planning and a team of dedicated professionals. Now it’s your time to go ahead and win the startup game. 

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Ani Barseghyan
Ani Barseghyan
Ani is a content strategist and writer at 10Web. She's been managing WordPress websites since 2011. Ani believes in user-centric content, Oxford comma, and avocado burgers. Read Ani's articles if you're interested in content marketing, SEO, and everything WordPress. You can always have a chat with Ani in our WordPress Family Facebook community.

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