Local Opinion: Funding is out there for startups, just ask!

The following is the opinion and analysis of the writers:

A recent guest opinion in the Star stated that launching a startup is hard, and more could be done to support them, especially regarding funding. We fully agree.

New businesses travel their own paths but share the same fundamental challenge: assembling the right people and skills to develop a product or service at a price people are willing to pay at a cost that is profitable.

In the early going, much of a founder’s endeavor is building the right team and proving the solution solves a big enough problem (product-market fit). Later, the challenge shifts to scaling that solution and maintaining or improving its margins (profit-market fit).

It is hard work, and according to the U.S. Bureau of Labor Statistics about 20% of new businesses fail in their first year. Getting from idea to prototype to early customers to market success requires a lot of time, talent, and funding.

A recent report by Skynova looked at CB Insights Data and found that 47% of failed startups cited lack of financing/investors, while 44% said they simply ran out of cash. These may sound like the same thing, but they’re not. Not every new business wants or needs to take outside funding to succeed. Some can bootstrap to scale. Others grow organically. On the other side, many businesses never find product-market fit — large and entrenched competitors limit sales reach, the market isn’t big enough, etc. Many more never achieve profit-market fit — it’s too hard to produce the product or service for a large number of customers, or do so at a competitive price that covers costs. What is common to all of these is having enough money to continue.

Recognizing this challenge, a few years ago our organizations and several others put together a white paper on early-stage funding. It runs from completely free sources of funding to Microlending, equity crowdfunding, and finally angel/venture capital investing. We also share the stories and perspectives of founders and experts along the way. Anyone thinking about starting a company, or struggling to find funding, should check it out.

We are happy to report that even more options exist today than when we wrote that. Several new funds have emerged to offer no interest, non-collateralized loans to companies just getting started. Tucson-based non-profit Community Investment Corporation runs just such a fund for BIPOC (Black, Indigenous, People of Color) entrepreneurs. To get across the next gap, companies can apply for Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) funding from a dozen federal funding agencies. Alternatively, equity-based crowdfunding has proven to be an excellent bridge, and several local organizations provide discounted access to national platforms. And for profit-market fit, programs like the University of Arizona’s FORGE Ahead accelerator are strongly focused on identifying and connecting capital sources and mentoring companies through scale and toward investment. All of these cost founders little to nothing.

Read the full article at Arizona Daily Star