Set.Up GuimarãesDifferent Ways to Finance Your Project

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Different Ways to Finance Your Project

Many “entrepreneurs” work solely with the goal of raising investment from business angels or venture capital, and it is true that there may come a point when such funding becomes essential for the continuation of the project. However, it is also true that investment rounds should (eventually) be a means, and never an end in themselves.

The truth is that, beyond the much-coveted investment rounds, there are several other ways to finance your project effectively. And the best part? We’re going to reveal several of them to you.

Bootstrapping
This is perhaps the most commonly used alternative by entrepreneurs to finance their projects, at least in the early stages.

In the initial phase, many startups are financed with their own capital—a process commonly called bootstrapping. Essentially, the entrepreneur builds the business on a smaller scale, fully relying on their “own resources.” Typically, the required investment is relatively low.

Entrepreneurs who choose bootstrapping generally fall into one of two situations:

They continue working for another company, dedicating/investing part of their salary into their project/business;
Or they use part of their savings (which implies having already gone through a prior savings period).

Opting for bootstrapping brings several advantages, such as full control over the business (since contractual obligations are usually minimal). Another benefit is ending up with a larger share of the profits.

But beware! Everything has pros and cons, and bootstrapping is no exception. The entrepreneur is 100% dependent on their financial resources, so if things go wrong, their wallet takes the hit.

So why is bootstrapping one of the most chosen financing methods for entrepreneurs? Freedom—freedom to control, to have autonomy, to apply your vision, experiment in countless ways, and make it happen.

Crowdfunding
Crowdfunding is essentially a collaborative financing system, where multiple people become “individual investors” and can invest in a product, business, or project.

Some online platforms that allow crowdfunding campaigns include:

PPL (national); Kickstarter (international) – US-based, the world’s largest platform. Launched in 2009, it hosts products from around the globe, from technology to design, art, and music. It charges a 5% commission on funds raised, but if financial goals are not met within the set deadline, no money changes hands;
Indiegogo – founded in 2008 in California, one of the first crowdfunding platforms. In 2014, Indiegogo launched Indiegogo Life, a service for raising money for emergencies, medical expenses, celebrations, or other life events (this version charges no platform fee);
GoFundMe (international) – works similarly to Kickstarter but without time limits, giving users donations immediately after a 5% platform fee;
Kiss Kiss Bank Bank (international) – French, founded in 2010, focused on design, journalism, books, games, photography, web, and technology;
Fundly (international) – has raised over $330 million, operates via Facebook accounts;
Fundrazr (international).

Why do people benefit from supporting ideas/products on crowdfunding platforms? Promoters usually offer a reward for each backer, often proportional to the amount contributed, such as product copies or related merchandise. Another tip for promoters is to get sponsors who can help promote the idea or product effectively.

Business Angels
According to the Agriempreende Guide on Startup Financing, Business Angels (BAs) are private individual investors who provide their own money to support projects with high growth potential and innovative concepts likely to generate profitability, in exchange for equity in the company. This is a time-limited participation aimed at medium-term value creation, with the goal of later selling shares to other interested parties.

BAs act individually or through Angel Clubs (legal entities), sharing resources and strategic advice among the companies they invest in. The money they contribute is known as smart money, because it comes with the investor’s expertise, actively supporting the development of the project. In addition to capital, Business Angels provide know-how (essential for operational management) and networks. The more aligned the investor is with the entrepreneur’s technology and market, the “smarter” the money.

Venture Capital
According to the AEP “Investment Financing” Guide, Venture Capital (VC) is a temporary investment solution that involves participation in the equity of the companies financed. The VC firm or agent becomes a shareholder, strengthening the company’s financial capacity and management skills.

Venture capital is suitable for companies in emerging, highly competitive sectors characterized by innovation (products, services, production or distribution processes) with high growth and profitability potential.

There are several venture capital operators in the market. Choosing one depends on factors such as investment policy, specific objectives (internationalization, IT, environment, commerce, tourism, etc.), and the desired investment size.

European Financing
For European funding, one of the main platforms is Portugal 2020, with information available at www.portugal2020.pt and on the IAPMEI website at www.iapmei.pt.

The Espaço Empresa of the Municipality of Guimarães is also available to help clarify any questions regarding this and other support programs. Contact: +351 253 421 213 or espacoempresa@cm-guimaraes.pt.

Now it’s up to you to choose the best way to finance your project!