What about funding?
If your business is like most fast-growth startups, you’ll probably have to raise capital from outside investors at some point. Illinois Ventures is the venture capital arm of the University, providing both seed-stage and follow-on capital for technology-based startups that are affiliated with the University, including companies led by faculty members, students and alumni. Illinois Ventures also provides counseling and advice to help you understand and successfully navigate the fund-raising process, whether you’re dealing with banks, angel investors or venture capital firms.
Q: When should I start thinking about raising capital?
A: It’s never too early to think about how you can raise capital for your business, but it’s best to start with a clear plan. What do you need money for? What technical, operational or commercial milestones will outside funding help you to achieve? How much money will you need to achieve them? The answers to these and other questions can help you determine when you should start fundraising, which investors or lenders you should approach, and how you should structure the investment. Plan ahead so you don't run the risk of running out of money before you can raise the new capital that you need.
Q: Should I raise debt or equity capital?
A: Borrowing money is generally less costly in the long run than raising equity capital, but most startups can’t qualify for traditional bank loans. They don't have existing cash flow from which to repay the loan, and they don't have much in the way of tangible assets to use as collateral. Equity investors like angel investors and venture capitalists will invest in risky and unproven startups, but they want to see that the company can grow rapidly to provide the high rates of return that they need. Equity investors will become part owners of the business, so they need to know that the business itself can rapidly increase in value. They’ll also need to agree with you on the plan for cashing out of the business as some point in the not-too-distant future. That usually involves a sale of the company so, if you plan to spend the rest of your career as its CEO, you’ll have a hard time convincing venture capitalists to invest.
Q: What resources are available at the University of Illinois to help me find investors?
A: Illinois Ventures provides both start-up and follow-on capital for technology-based companies that are affiliated with the University or led by students, faculty or alumni. Illinois Ventures can also help you connect with other potential investors on a local, regional or national basis. We can also help you navigate the fundraising process by advising you on fundraising strategies, deal structuring and presenting your idea to investors.
EnterpriseWorks can connect you to Entrepreneurs in Residence (EIRs) who can help you develop your business plan and reach out to potential investors. EnterpriseWorks also offers regular programming on a wide variety of start-up related topics, including financial planning and fundraising.
Illinois Ventures, EnterpriseWorks and other players in the entrepreneurship ecosystem can also connect you with entrepreneurs who have “been there and done that,” so you can learn from what has worked for other successful startups at the University of Illinois.