A study from the World Economic Forum found that there are three main factors contributing to the altered funding means for startups today. As the study states, it has been reshaped over recent years by new innovations and confident investors that don’t see the status quo as a necessary means of providing capital to startups. The three factors are not only relevant to your startups goals, but also tell a story about the direction funding may be going in the future. And the last thing you want to do is miss out on the newest trends.
Changes in Traditional Funding
While many startups used to rely exclusively on venture capital firms to providing funding, the amount of VC firms in existence today has dropped substantially in recent years. In fact, according to the study, private venture capital firms have fallen over the last decade, representing the only type of investor that has seen a decrease in that time.
However, while VC firms fall, angel groups and individual angel investors have become notably more prevalent in the market. Angel groups have increased by 78 percent since 2009 and individual angel investors have increased 33 percent in the same period of time. This spells trouble for startups investing their time in wooing VC firms, even in emerging markets.
Crowdfunding on the Rise
It’s no secret that websites like Kickstarter and Indiegogo have made a huge impact on the world of funding for startups. They have made it staggeringly possible to acquire thousands, even millions, of dollars before your product has even hit the market. And with more success stories than most major sports leagues, it’s not hard to get excited about the prospect of acquiring funding from friends and family.
Private Debt Market
As the study shows, banks have been retreating from the surprisingly lucrative business. This allows alternative enterprises come in and fill the gap. Because of increasing regulations, more and more banks will continue to pull out, leaving a vast array of funding opportunities open for budding startups.
