2019-10-08
Financing

Financing

Finding the right financing at the right time is a huge challenge for any startup, regardless of size or ambition. Fortunately, there are many options for you to support the growth of your business. What type of financing do you need, and when?

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Bootstrapping

Before you even begin your search for financing, focus on the resources you already have to run your business. Remember to tap into your personal reserves before turning to other sources of funding. You will then be able to concentrate on the essentials: the creation of your product or service, its marketing, and your first sales which can in turn feed your growth.

Donations and Grants

One of the best kept secrets in terms of funding is the existence of many government grants. Over the years, the various levels of government have implemented a number of financial resources to support startups in the phases of their growth, notably to finance part of the team’s salaries, or to hire students or researchers. You can’t find your way around? View the complete list of grants available by sector, industry or region, developed by Acclr on the Info Entrepreneurs website .

Are you part of a startup that works in the impact economy field? The Maison de l’innovation sociale has developed a great tool to find your way within the financing offer.

Several organizations also offer scholarships to entrepreneurs. Montréal inc. launches a competition, twice a year, to gain access to a star-up grant and privileged access to their business network.

Fundica has also provided you with a comprehensive search engine for financing.

Look for funding

Microcredit and Business Loans

Talking about credit or loans can be scary. Futurpreneur and BDC offer double financing to support you in starting your business. PME MTL can also give you access to loans at advantageous interest rates, in addition to offering personalized support and scholarships. Many financial institutions are also open to supporting entrepreneurs. Don’t be afraid of personal loans! Even if no one likes to go into debt, credit allows you to build your business without diluting your assets.

Friends and Family - Love Money
Before turning to institutional investors, think about the people around you: do your family or friends have the financial resources and the will to support you financially? Feel free to talk about your business to your trusted relations to measure their interest. In addition, you won’t have to report your action or pay fees with the Autorité des marchés financiers since this type of financing is not subject to it. On the other hand, keep in mind that the personal relationship with these funders can become more difficult or confrontational because of the nature of the initiative. Never encourage them to invest more than they can. State clear terms of participation or repayment, and prepare for all eventualities, including possible loss of investment.

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Montreal

Investment

Raising capital may seem glamorous. Who wouldn’t dream of raising millions to support the realization of his or her wildest dreams? On the other hand, pitching your company to investment funds requires considerable work and great discipline. Your round may be funded by a single VC or you will be asked to have the support of many to finalize your round.

Angel Investors
Angel investors are people or entrepreneurs from the business world who want to invest in innovative projects. The angels meet a few times a year to listen to pitches and support entrepreneurs together, or separately. In Montreal, you can consult Anges Québec to learn more.

VC
So-called venture capitalists (VCs) seek to realize some type of investment. It is recommended that startup founders build a network of VC investors long before a round of funding to fully understand the interests and types of investments targeted by each one. To get inspiration on how to set a strategy, check out The Startup, the most followed entrepreneurship blog on Medium. In addition, the following reflection framework is particularly appreciated by VCs:

The 4 MS: A Framework for Young Startups

Market = big market opportunity
  • Specific people with real needs
  • Clear competitive positioning
  • A big attractive market
  • Trends and a favourable moment
Model = disruptive and virtuous
  • A valuable and differentiated product
  • An effective market entry strategy
  • Profitable monetization
  • Growth and defence potential
Management = the best team to execute
  • An outstanding team
  • A knowledge of unique perspectives
  • Resilience, ambition and purpose
  • Better team-project compatibility
Momentum = ability to grow rapidly
  • Traction
  • Ambitious 18-month plan
  • Model of efficient growth in capital utilization
  • Growth strategy and credible success

Source: B. Golden, Paratech Ventures

Montreal is fortunate to host several investment funds, including Espace CDPQ. Before embarking on an investment round, consider which investment funds are active in your industry and what type of businesses they are used to investing in. For example, Luge Capital is a fund that invests only in fintech. Do not waste your time (or theirs) if you are not in this field.

To access the full list of investors in Quebec and Canada, visit the Réseau Capital and CVCA directory.

Crowdfunding
Finally, crowdfunding can be a nice alternative to finance your startup. Setting up a campaign requires time and money, but it is also a very good market test to measure the interest generated by your product or service.

There are two types of crowdfunding: you can turn to traditional crowdfunding (buying products) on platforms like La Ruche, Ulule, Kickstarter and Indiegogo or towards crowd investing (equity funds in exchange for equity) with Gotroo, FrontFundr or SVX.

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