The financing of the technology-based companies, spin-off and startup > , requires a combination of different economic sources of funding throughout the different stages of a company's life cycle Financing wheels . These sources of financing can be owned by entrepreneurs or come from outside funds, both public and private.
The most common financing instruments for technology-based companies are :
Crowdfunding is the English term used to refer to investment or collective financing. It means being able to socialize the financing of a project, articulating a group of people who financially support the project. With a simple example, it would be the following idea: instead of asking a person to invest 10,000 euros in your project, you would ask 10,000 people who invite 1 euro in this, generally, through a digital and collaborative platform specialized in Crowdfunding.
These collaborative platforms specializing in crowdfunding bring people who have projects with people who are willing to finance them through contributions. According to the Spanish Association of Crowdfunding, there are four types of crowdfunding: reward, donation, investment and loan. Numerous specialized platforms have emerged in each type of consideration, which are positioned as financing channels for entrepreneurial projects.
The Reciprocal Guarantee Companies are those companies formed by entrepreneurs with variable capital and whose sole objective is to guarantee or guarantee in favor of their partners so that they can access loans in the best market conditions. Therefore, it is not in itself a source of funding, but rather a facilitator of access to sources of funding.
Las aportaciones de los promotores son aquellos fondos propios proporcionados por el mismo emprendedor. Es la principal vía de financiación en etapas iniciales, no solo en aportes económicos sino también en conocimiento, tiempo y dedicación al proyecto empresarial.
The promoters' contributions are those own funds provided by the entrepreneur himself. It is the main way of financing in initial stages, not only in economic contributions but also in knowledge, time and dedication to the business project.
Financial institutions offer a wide range of ways to finance third-party funds. They can be in the short term, those debts that must be returned in a time horizon of less than one year, and in the long term, exceeding the year.
The most common financing modalities offered by banks are:
Loans: This is a financial contract whereby a financial institution pays an amount of money to the company, which receives it in a single moment, assuming the obligation to return it periodically together with interest for a pre-established period of time. They are usually tied to a specific investment in consumer, productive or service goods.
Credits: is a financial contract whereby a financial institution grants a company the right to borrow up to a certain amount over a pre-established period of time. Only interest is paid for the amounts finally settled and not for the entire credit granted. It is a generic financial instrument and is not linked to any specific operation.
Issuance of debt, bonds and debentures: these are securities that represent a part of a loan issued by the issuing company, which expresses the interest rate and the terms in which the capital must be returned. They are divided into shares and receive names such as bonds, bonds and promissory notes.
Suppliers: this is the financing granted by commercial creditors to companies with the deferral of payments to be made. It is difficult to achieve but at the same time necessary to reduce the average maturity period of the company.
Leasing: is a lease with a purchase option whereby the leased person acquires a leased property, being able to acquire it at the end of the lease.
Renting: it is a lease of goods with greater coverage and services than the leasing contracts. It is a more expensive option but with it the company is guaranteed a good management and operation of the good.
- Participative loans are a financial instrument that provides the company with long-term own resources without interfering with its management. Financing business projects as a whole, contemplating all types of material and immaterial investments. They can be of two types:
- Participative loans convertible to capital: after a term and at a stipulated price, the loan becomes capital of the company.
- Participative loans not convertible to capital: the loan must be repaid.
Grants, loans and public support to entrepreneurs of technological businesses are called and granted by the public administrations of each Ibero-American country. They can also be found autonomous, local and even other public bodies.
In the Spanish case, the following organizations and programs stand out as public aid to finance spin-off and spin-off companies:
CDTI: provides advice and training at the idea stage to entrepreneurs, seed funding, startup and internationalization of the company and commitment to boost technological SMEs. His most outstanding support initiatives are:
NEOTEC initiative: initiative of the Spanish government to support the creation and consolidation of new technology-based companies in Spain.
NEOTEC Capital Risk: Spanish venture capital investment program.
ICO: funds entrepreneurial and innovative initiatives.
ENISA: facilitates funding for SMEs linked to innovation.
Self-financing are those own funds obtained by the resources that the company itself generates in the course of its business activity.
Venture capital are professional investors that support entrepreneurs. They participate, on a temporary and generally minority basis, in the capital of companies and businesses with high growth potential to stimulate their development and increase their market value, with the objective of obtaining capital gains in the medium term.
The most common risk capital companies are:
Venture Capital Companies (SCR).
Capital Risk Funds (FCR).
Societies of Risk Capital Entities (SGECR).
They are all aimed at companies that find it difficult to access other sources of financing, during an initial or start-up phase, or in their maturity stage as a result of a process of expansion or restructuring. It is an injection of own funds through temporary participations assuming the same risk as the rest of the partners, is a financing without guarantees or guarantees.
The characteristics of Venture Capital are:
Financing business development. The investment consists of taking holdings in the capital of the company, they can also grant ordinary or participatory loans to investees.
Temporality of the investment. This funding is always granted with a delimited time horizon, which is usually very varied according to the characteristics and status of the project.
Participation in companies whose securities are not listed in the first stock market.
Minority of ownership. The investment is usually between 25% and 35%.
High risk and expectations of growth or profitability. They are risky investments and less liquid than other forms of investment or long-term financing. The project in question acts as an element of guarantee and endorsement.
Management support. In addition to the transfer of funds in the medium to long term, risk capital implies important advisory work and management support, which is an added value, especially in the start-up phases of new projects.
The financial instruments used by the Venture Capital can be of two types:
Equity instruments or own resources, with which the participation in the company is through acquisition of shares.
Debt instruments or other resources, with which the participation in the company is through participatory loans.
Business angels or angel investors are individual investors (usually entrepreneurs, business executives, entrepreneurs or savers) who privately contribute their capital, knowledge and management skills or their network of personal contacts to actively participate in the implementation of the project Entrepreneurial business, help in the business management of technological businesses to entrepreneurs and obtain capital gains in the medium term.
Business angels finance operations of between € 25,000 and € 250,000 in companies with fast-growth prospects that allow a medium-term divestiture, between 3 and 5 years. One of its main characteristics is the anonymity of belonging to Business Angels Networks.
The Business Angels Networks act as catalysts in two key points: supply and demand of capital. On the one hand, they capture business projects of interest, both from start-up companies and from companies that want to carry out expansion processes. On the other hand, they identify potential business angels that have capacity and, above all, the expectation of investing in business projects with a high degree of risk.
Innovative projects are captured in different ways: universities, business schools, business incubators, technology parks, business competitions, forums of interest, etc. In turn, business angels are identified by various means: employer groups, business associations, chambers of commerce, consultancies and other economic circles.
More information: "The Angels Investor Networks in Latin America and the Caribbean". MIF 2013.
Family, friends and other own funds are those additional contributions to the capital of the company that members close to the entrepreneur. In most cases, the objective is not to lose the investment made instead of gaining significant capital gains, since the investment decision is based more on the knowledge of the entrepreneur than on the criteria of profitability of the business project.