As a new entrepreneur, or even a seasoned entrepreneur, finding the path to success can be tricky business. Throw in the added pressures of having no money, short deadlines and limited knowledge (let’s face it, you don’t know everything) and you’ve got the perfect cocktail for pure business chaos.
Let’s talk a little more about the first pressure, having no money. It’s one of the biggest challenges startups face and can put you in the tough situation of choosing to hire a new developer or paying your rent for the month. So how can you avoid that pickle of a problem?
There are a few major funding options for startups:
We’ll be exploring each of these funding options in later blog posts, but today we’re focusing on government and government-supported grants. Often considered “free money” because all you have to do is apply (there’s no exchange of equity), there are lots of grants in Canada for various industries.
There are a few hazards you may be able to navigate when chasing grants – if you know what to look for. In our line of work, we spend a lot of time learning the ins and outs of government funding, and we’ve got three key things for you to consider:
Often, government and government supported programs evaluate eligibility based on a benefit to the government jurisdiction they are supported by (Province and/or Country) and create strict requirements around innovation, hiring, export potential, etc. In the excitement to access this alluring pile of cash, entrepreneurs sometimes shift, pivot or tweak their business model/product to fit the grant requirements. This takes them in a long-term direction that they didn’t originally perceive as being optimal. Now, don’t get us wrong, we’re all for pivoting… for the right reasons. However, if you’re adapting your core strategy for a quick $10,000, slow down and rethink how you’re changing your business. That grant amount could be the smallest fish in the sea of capital you’ll be raising.
What’s dumb money, you’re asking? Think of it as fluff, or filler. It’s free and there are no obvious strings attached, but its contribution ends at face value. In comparison, smart money usually has a person (or people) behind it that can help solve your business problems and overcome challenges. As an entrepreneur, you have limited amounts of time and if you’re dedicating a good chunk of that to financing your business, you want to make sure it provides maximum benefit. Note: not ALL grant funding provides dumb money – some can provide some form of ongoing advocacy and resources, it’s just a matter of understanding the ecosystem and knowing the best organization to go to.
Something else to consider: dumb money can’t help with product-market fit. As an entrepreneur, your primary job is to get people to buy your product or service. This helps with market validation and product iterations. Spending time applying for grants takes away from other funding sources and activities that contribute more to understanding your product-market fit.
Grants should never be your primary source of funding. Diversify your funding options to spread your eggs throughout multiple baskets. Yes, government grants have criteria and restrictions that can pivot your business if you’re not careful, but if used strategically, they can be quite effective. A good mix of angel investors (who provide the knowledge, experience and support a new startup needs) and government grants could be a dynamite combination for your business.
Grant funding is an option available to entrepreneurs and startup founders, to help ease the burden of bootstrapping. But watch out for free money and dumb money because that’s not the sort of tool that helps you in the long run. Develop a financing strategy for your business – think about it carefully to evaluate how multiple funding options can work together. The path of an entrepreneur is not an easy one – it can be perilous, full of ups, downs and difficult challenges– but it can also be highly rewarding.