Many investors find it challenging for capital raising for EdTech Startups. There are many strategies to apply to this area. In this guide, we will discuss the key areas of capital raising strategy for EdTech Startups. This might open your eye to many ways to gain funds. Certain ways might be new to you as well.
The following are the five main capital raising strategies for EdTech startups:
- Angel Investors
- Bank Loans
- Fundraising Contests
Let’s shed light on these key points.
Bootstrapping is another technique for capital raising strategies for EdTech startups. Bootstrapping is applied only if EdTech is a small-scale business. In bootstrapping, you can borrow money from your family and friends to start up a business.
It doesn’t mean you don’t need to support it with your funds. Initially, the capital of the business is yours as you are the key stakeholder. Apart from that, you can borrow money from your family and friends on a loan basis or as gifts. You can promise to pay it back with a small loan percentage or without a loan percentage as well. That depends on who you borrow.
Bootstrapping is a wonderful capital-raising strategy for EdTech startups. It gives a lot of flexibility to get funds as well. You can borrow money with a fair interest rate and a flexible payback plan that is accommodated by your family or friends.
The main limitation of bootstrapping is that you cannot apply this concept to large-scale businesses. Large-scale businesses require a huge amount of initial capital. But for medium-sized or small-scale businesses, bootstrapping is a key technique to raise funds for EdTech businesses.
Crowdfunding is the main means of capital raising strategy for EdTech Startups. Due to the existence of modern technology, it is easy to perform crowdfunding these days. To perform crowdfunding, you need to publish a business pitch on any of the public crowdfunding platforms. Then, there are crowdfunders available on those platforms as well. They would check out your business idea. If they are interested, they would donate their funds to support your business model.
Finally, you’ll have a sufficient amount of funds to start up your desired EdTech business.
There are two main other benefits of Crowdfunding. The following are the two key benefits of crowdfunding:
- Gain funds to start up the business
- Obtain free marketing
On these platforms, you elaborate on your business idea, and interested people will look out for it. Then, they would talk about your business idea with multiple people. Ultimately, you gain free marketing as well.
The limitation of crowdfunding is that plenty of people use this technique to raise money. So, it is challenging to survive in this business market. You might end up with many competitors as well. They might have identical ideas or ideas in the same field. Moreover, the best EdTech idea wins a huge lot of funding.
Angel investors, just as its name signifies, are called Angel Investors. They are engaged in investing huge amounts of funds in EdTech startup businesses. This type of investor consists of a huge amount of money or net worth and they are mostly engaged in investing in small EdTech ideas. Certain Angel investors invest in large-scale business ideas as well. But to do so, your idea has to be mind-blowing and catchy. So, it depends on how you present it and the reach of your idea.
Angel investors invest through crowdfunding platforms as well. But as they also have to bear a pool of risk, very few angel investors invest a huge amount nowadays. So, depending on the way your business idea impresses a person, such investors would come forth to pat your shoulders.
The main advantage of Angel investors is, that they not just invest funds, as they consist a huge experience in investing in many startups, but they would provide mentorship as well. If you gain mentorship from an experienced and skilled person, that would reach you to an extra level of height.
Fundraising contests are another interesting capital raising strategy for EdTech startups. There are many competitions for entrepreneurs and startup ideas. You can enter those contests with a strong and reliable business idea. Make sure your business plan is appealing, unique, and interesting as well. This is also like crowdfunding. In crowdfunding, you don’t compete directly, but in fundraising contests, you compete directly with your competitors.
Apart from the battle between winning and losing, you get a chance to exhibit your idea to the world. There might be many investors watching your contest. Even if you don’t win, if your EdTech idea attracts an investor, you might get in touch at least for a small number of funds as well.
Fundraising contests are not just about winning or loose. Even if you don’t win, you won’t end up with an empty pocket as well. Believe in the fact that strong and life-changing ideas win. It might not happen immediately, but at least would happen soon.
Bank loans are the main means of capital raising strategy for EdTech Startups. This is mainly specialized for large-scale businesses. There are many banks and financial institutions who are willing to provide loans to start up EdTech ideas and entrepreneurial ventures as well. If you have a strong and catchy business plan in terms of your idea, timeframe, profit generation, expenses, capital raising methods, and many more!
As you know, banks are very strict about giving bank loans. You have to follow many procedures to borrow money from banks as well. It might be frustrating, but if you require a huge amount of capital, the bank is the main source to fund you. You need to give them a structured view of how you would repay their loans as well. This is the main point they consider. If you have a reliable way to pay back, there are more chances of gaining the essential fund in your pocket.
Also, make sure your previous bank dealings are very smooth and good-going. If you had ended up with any inconveniences or clashes, that would tighten you up to get the loan on time. Banks are mostly willing to invest in large-scale businesses as well. If you find difficulties raising money, do keep an eye on the banks to approve some funds.
The only limitation is that if you fail to pay back the loan, the consequences you face might be too heavy to bear. So make sure you have a stable startup strategy and a Plan B to pay funds.
In conclusion, we discussed the five main ways of capital raising strategy for EdTech Startups. They include Bootstrapping, Crowdfunding, Angel Investors, Fundraising contests, and Bank loans. All these are key areas for the application of capital raising strategy for EdTech Startups. If you need any help concerning this, don’t hesitate to Contact us. We are all ears available for your service.