Ways to Finance Your Blockchain Startup
The industries recognizing blockchain’s revolutionary solutions are rapidly growing. It creates a huge potential for attracting investors and funding opportunities. If you’re an entrepreneur planning to enter the blockchain space, taking on the funding challenge would be worth the push.
Costs Involved in a Blockchain Startup
Before sourcing funds, understanding the costs involved in a blockchain startup is crucial. It’ll depend on the type, platform, and complexity of the blockchain solution you’re building.
You must also factor in the technology stacks, equipment, staffing expenses, and third-party tools supporting your venture. It’s best to identify the appropriate budget for every business phase, from development to maintenance.
The following are the expected cost implications of building a working blockchain business from scratch.
If blockchain application development isn’t your expertise, you would have to hire a developer.
The fees depend on the project scope, location, and experience level. It’s imperative to hire developers adept in building a blockchain framework such as Hperledger or Ethereum. They must also know programming languages like Sophia and Vyper that target the blockchain ecosystem.
Most startups use a DApp (decentralized app) to launch their ventures in a public blockchain platform such as EOS and Ethereum.
You must purchase the native cryptocurrency of your chosen platform to launch, operate, and transact. It’s important to know that most Dapps building tools are open source which can help lessen your expenses.
Onboarding, migration, and training
You’ll need to shell out money to move an entire database from a centralized to a decentralized framework.
You must acquire hardware, software, and human resources to perform the migration processes. Aside from the IT staff, other employees need to join the onboarding and training procedures. These procedures may entail expenses but are essential to building the startup.
Electricity and storage
The blockchain network consumes vast energy, leading to high electricity bills. However, the costs will depend on the consensus algorithm utilized. You’ll also need to factor in storage costs in your budget. As the blockchain network grows and the adoption increases, you’ll need more space to accommodate the influx of data.
Having a designated office space will allow you to run your business efficiently. It also gives it a more professional vibe, making it more attractive to investors. Aside from the rent, utilities, and the internet, you’d also have to spend on office equipment and insurance.
Marketing and advertising
Marketing is an integral part of building a business, blockchain ventures included. You’ll need to spend on market research and surveys to create viable business plans. Furthermore, you also need to allocate a budget for advertising to get clients for your business.
How to Finance Your Blockchain Startup
The evolving business landscape offers companies various opportunities to secure funding. In the past, choices were limited to personal loans or grants. However, more institutions provide more ways to build up that much-needed seed money.
Once you’ve established a budget, you’ll have a better view of how much seed capital you need to start your blockchain business. You can use this data to look for the best funding sources that fit your business needs. The following are some ideas on how you can get your blockchain startup launch off the ground.
Credit card financing
A credit card provides revolving credit that you can use to pay for short-term business expenditures. It can include utility bills, platform subscriptions, and office supplies.
Businesses with sporadic income, such as startups, can benefit from the credit card’s flexibility. Startups don’t have business credit, so some entrepreneurs use personal credit to fund their ventures.
Using a credit card to fund your blockchain startup also allows you to build up your credit. If you maintain good credit standing, you’ll have a better chance of getting approved for a business loan.
You can apply for your first credit card online. Once you approve and receive the card, it’s best to use it wisely. Ensure that all your documents, like proofs of identity and income, are in order. Financial experts also recommended reading the terms and conditions carefully. Keep track of your expenses and pay the dues on time.
One of the ways to secure startup funding is to join competitions. Several organizations recognize blockchain’s impact on various industries and its growth potential, so they initiate contests offering opportunities for startups.
You can showcase your concept and network with possible investors. These events are also great opportunities to meet with brilliant minds and industry leaders to gain inspiration and more knowledge.
Usually, the themes of these competitions revolve around global issues and business solutions. Organizers ensure that the events provide the best scenarios for success.
Winners get seed capital to launch their businesses. Even those who don’t win can gain valuable knowledge, exposure, and connections that can help get possible investors.
Before joining a competition, it’s best to attend blockchain conferences to get industry insights. You can identify your target market and industry gaps you can fill. Some successful entrepreneurs get their “Aha!” moments by being in a relatable and dynamic environment.
Blockchain accelerator programs
A startup accelerator program offers mentorship and opportunities to scale startup operations rapidly. These programs also connect promising founders and CEOs with business partners and investors. They provide a collaborative environment and expert advice on how to pitch your ideas to the right people.
Entering an accelerator program shows investors that your business has excellent investment potential. It’s a more targeted approach since the investors are already seeking blockchain-specific ventures to connect with.
Accelerators offer funding in exchange for business equity. It’s why it’s crucial to find the best one that fits your needs. Find out what investment opportunities they offer and see if they match your business goals. You can check out accelerators specifically for blockchain ventures so you can turn your Bitcoin application into a business.
Historically, banks are wary of approving loans for startups. However, you can still secure a business loan using collateral from alternative financing institutions. They usually offer competitive interest rates and quick processing times. Finding a reputable company with stellar data privacy and collection record is vital.
Applying for a loan using collateral increases your chance of approval. It’s a common notion that cars and houses can be used as collateral. However, you can also utilize other properties, such as equipment with ownership certificates, for your loan application.
Perhaps you already have clients who wish to use your blockchain application. You may use the invoices issued to your clients as collateral for your business loan application. However, it’s essential to note that if you can’t make the monthly payments, the financier will own the proceed from the invoices.
Read here : How to Invest in and Make Money from Cardano?
Blockchain venture capitalist (VC)
While more considerable investments are now geared towards more stable blockchain ventures, a few VCs are still looking to fund startups. The traditional business funding institutions are still in the process of understanding the technology. Fortunately, VCs specifically targeted blockchain startups now exist.
European and US organizations have already set up funding meant for the blockchain space. Some companies from these regions also cater to other jurisdictions, such as Asia and South America.
They have a network throughout the blockchain ecosystem, including universities, other investment firms, and the blockchain conference circuit. This endeavor allows VCs first-hand information on the growth potential and sustainability of the startup applicants.
The key is to get the VC’s attention with a solid adoption and sustainability track record. The screening process involves a big picture and detailed analysis. It also entails assessments from external technology experts and advisers. Preparing for these proceedings is best to secure the funding you need.
Thanks to platforms like Kickstarter, crowdfunding has become a viable source of funding for small businesses. In the past, this fundraising method is only applied to short-term projects. However, it has evolved to fund startups, including blockchain applications.
Crowdfunding campaigns for the blockchain space can utilize incentive programs for investors. You can offer NFTs (non-fungible tokens) or utility or native governance tokens to incentivize investors.
To successfully get funding for your blockchain startup, you must first identify the crowdfunding model your business needs. It’s also best to communicate your vision to the decentralized community to elicit engagement and, hopefully, investments.
How to Avoid Large Startup Costs
Building a blockchain startup can be costly. Fortunately, you can apply the following practices to mitigate the costs and maximize the funding you’ll receive from investors.
Hire an offshore team
One of the best ways to lower expenses in blockchain development is to hire offshore software developers. Hiring an established development team will allow you to have experts onboard without spending on training. Hiring a tester and a project manager is best during this stage of your startup.
Collaborate with brilliant minds
Blockchain technology’s decentralized nature also extends to its brilliant community.
You can access thousands of teams and individuals who can help you adopt and launch your startup venture.
It helps to look for innovative projects and free resources initiated by blockchain experts to help you with your endeavors. Most of the time, they’re willing to share their expertise so you can avoid costly mistakes.
Manage maintenance costs
Over the years, blockchain has grown into a vast network of developers and enthusiasts. These experts consistently build and sell elements that make up a unified infrastructure. You can buy application components developed by other people and repurpose them. It’ll allow you to create your application without starting from scratch.
Use pre-built modules
Some marketplaces offering decentralized technology tools offer modules you can use to implement your blockchain project. You can have cost-efficient access to software components created by talented and qualified professionals. You can acquire significant savings using this plug-and-play approach to blockchain app development.
Use open-source tools
Your startup requires building a decentralized app that you’ll launch on a blockchain platform. Creating a DApp from scratch can be expensive. It’s best to use open-source building tools to save money. You can use these savings for marketing your venture and hiring a business advisor.
Finding the Best Funding for Your Blockchain Startup
The business, health, and education sectors acknowledge blockchain technology’s transformative qualities. Other industries are also looking to adopt this breakthrough innovation in creating more streamlined operations. These benefits make a blockchain startup a viable business venture.
Like any other business, blockchain startups require funding. Since it requires technical expertise and advanced software, product development and adoption can be highly expensive. Getting seed money is possible. However, it can get very challenging.
Vast funding sources are available, especially since investors now find value in the blockchain. However, the economic climate and tough competition can be barriers to securing the much-coveted funding.
There are several ways to raise seed funding for your blockchain startup. One of the fastest and doable ways is to use a personal credit card. This revolving credit can be a great help in managing expenses. The key is to use it to generate income and pay the dues on time.
You can also secure a business loan using collateral. Presenting a lender with viable assets can increase your chances of approval.
If borrowing money isn’t feasible, you may join blockchain competitions. Most of the time, the prizes are sizable, making it an excellent funding source. Even if you don’t win, the knowledge you’ll get from other blockchain enthusiasts can help propel your business to success.
Seeking the help of venture capitalists or crowdfunding are also excellent ways to raise funds for your startup. Many businesses have become successful with these fundraising methods.
No matter what method you choose to finance your startup, it would help if you prepared accordingly. The key is to make your startup stand out so investors and lenders can’t resist but have a piece of the blockchain pie.