PROJECT FUNDING SOURCES
Understand the different types of project funding sources, so that you can get a funding partner that fits well with your business philosophy.
Project Funding Sources Overview
It is critical that you understand the types of funding available, so that you can align your funding strategy with your project objectives.
Broadly speaking, there are three types of project finance available:
1. Equity – the funder takes up a share of your business in exchange for the funds invested.
2. Debt – the funder borrows you the capital, and you pay it back over an agreed period of time.
3. Mezzanine – a combination of debt and equity funding.
Inside each of these categories, there are various types of organizations that provide project funding. Broadly, they all have different internal objectives and motivations, so take the time to find a funding partner that will enhance your project, and not work against you once the deal is done.
Project Funding Sources Types
In the section below, we provide short description of the most common types of DEBT and EQUITY project funding sources.
MEZZANINE funding structures are usually a combination of two different types of debt and equity funders, so it won’t be expanded on.
Project Funding Sources
A common source of funds for new projects starting out.
CAUTION:
When you borrow money from friends and family to fund your project, be aware of the unintended consequences that may impact relationships, should the project fail to deliver.
Crowdfunding is where a large group of individuals contribute to the funding of the project. Several platforms like Kickstarter, GoFundMe and Indiegogo provide crowd funding opportunities.
Crowd funding can take various forms:
DONATIONS – People contribute to the project without expecting anything in return.
REWARDS – People get a reward (like a t-shirt or a product sample) in relation to the size of their contribution.
DEBT – Individual contributions are treated as small loans, and need to be repaid as agreed. See LendingClub
EQUITY – Contributions are made in exchange for a small portion of ownership in the project or company. StartEngine is an example of an equity crowdfunding platform.
If you know or can get access to wealthy people in your community and you have a compelling story you can tell about your project, there is a chance that you could get these people interested in investing.
Often, HNWI’s are more interested in donating to worthy causes, and not really interested in commercial ventures, so keep this in mind when approaching them.
If your project is in the public interest or will help to stimulate the economy, you may be eligible for grant funding. Grant funding is usually provided by a government agency or non-governmental organization.
Search of “grant programs” or “grant funding organizations” to see what is available in your country.
Development banks are institutions that support private sector growth in developing countries.
If your project is located in a developing country, take a look at this list; you may find an organization that would be interested in funding your project.
Investment banks are able to structure complex and high value deals that may include debt, equity or mezzanine structures. Project finance through an investment bank requires a high level of financial literacy from the project owners (or their advisors), and are suitable for large scale, mature projects.
Debt funds invest in fixed income products like bonds, bills or notes. A debt fund may be an appropriate option for your project if the outcome is virtually guaranteed, minimizing the risk for the fund.
As the name indicates, private equity funds invest in projects in return for a portion of the ownership of the company.
There is a wide variety of PE funds; some would only invest in large, mature ventures, while others would look at smaller, more high-risk investments.
Do your research and find a PE fund that has the profile you are looking for.
Angel investors are wealthy individuals who invest their own money in startup ventures in exchange for equity. Find an angel investor that is a good fit for your project culture, and you will be well on your way.
This list of 100 angel investors is one source. Google “angel investor list (your country)” to find angel investors that you could potentially pitch your project to.
VC funds are companies that invest their investors’ funds in startups (and more mature projects) in exchange for equity.
A very popular form of project finance for software startups, the number of VC funds have grown substantially in the last 20 years. This list on Wikipedia is a good starting point to find a VC fund that you could talk to.
While VC funds invest in early stage and mature projects, seed funds only invest in early stage (startup) projects. This dashboard on Crunchbase is a good place to start looking for a seed fund.
GET FUNDING READY
If you are not familiar with the process of raising capital, getting funded can be a long and painful process. Cut through the complexity and save yourself a lot of time and effort by using our services to get your project funding ready.
We can do all the heavy lifting for you and then introduce you to potential investors.
Use our expertise to achieve the following:
- Develop a value proposition and narrative that aligns with your personal and business objectives
- Build a financial model that resonates with the type of investor you are looking for
- Get introduced to potential investors
Having said this, our services are not for everyone. We only work with projects that we believe have a real chance of getting funded.
Someone’s desire to get funded is not the same thing as a having a viable project.
In order to understand if there is potential for collaboration, we have a pre-qualification process, which starts with the form below.
When you click the button below, you will be asked a number of questions related to your project. Upon submission of the form, we will revert to you within 48 hours to advise whether we believe that we could be of service in helping you to get funding ready.
