6 SaaS Startup Funding Sources for Accelerating Growth

When starting a new company or expanding your existing one, raising funds is often the key to success.

Venture Capitalists (VCs) are investors who put their money into early stage companies to provide them with seed capital and support during the growth phase. They invest in promising businesses with high potential returns. Venture capitalists look at both the short term and long term potential of startups.

The goal of venture capitalists is to build strong brands, increase revenues, expand markets, and create innovative technologies.

Prepare your SaaS for Funding:

Raising money for a startup can be quite cumbersome and daunting. Getting funding from venture capitalists is not easy. That is why you must prepare and position your SaaS startup for funding.

• Determine your target funders
• Prepare your documentation
• Think about the amount of capital you need
• Be specific on how the capital will help your SaaS grow.

There are several things that you should consider before applying for VC funding:

First, you’ll want to determine whether you want to raise debt or equity.

Debt financing usually comes at higher interest rates, but offers less flexibility in terms of how much money you can borrow.

Equity financing, however, gives you more control over how much money you receive.

Second, you’ll need to decide whether you want to apply for seed or Series A funding.

Seed funding typically involves smaller amounts of capital compared to Series A rounds.

Third, you’ll also want to examine the amount of funding you would like to receive. If you’re looking for $1 million dollars, you’ll probably need to put together a proposal that shows why you deserve that kind of investment.

Finally, you will need to look into the type of investor you would like to approach.

There are several ways to approach raising capital for your startup:

One of the biggest challenges that entrepreneurs face is raising money. While some companies choose to self-fund their businesses and build their company organically, there are times when they need outside investment.

This can be done through crowdfunding, venture capitalists, bootstrapping, angel investors, and Series A, B and C funding.

1. Crowdfunding

Crowdfunding has become an increasingly popular way for SaaS startups to raise funds. It involves raising capital from a large number of individuals through online platforms like Kickstarter, Indiegogo, and GoFundMe. Crowdfunding can be an effective way to raise funds for SaaS startups that have a unique or innovative product or service that resonates with the crowd.

One of the advantages of crowdfunding is that it allows startups to gauge the market interest in their product or service before launching it. By putting up a campaign on a crowdfunding platform, startups can test their product or service with a large audience and get feedback on it. This can be valuable for startups as it allows them to refine their product or service based on customer feedback.

Another advantage of crowdfunding is that it can help startups build a community around their product or service. By involving their backers in the product development process, startups can create a loyal customer base that is invested in the success of the company.

However, there are also some downsides to crowdfunding. One of the main disadvantages is that crowdfunding can be a highly competitive space, with many startups vying for the attention of backers. This means that startups need to have a compelling story and a clear value proposition to stand out from the crowd.

Another disadvantage of crowdfunding is that it can be a time-consuming and resource-intensive process. Startups need to create a compelling campaign, produce high-quality content, and engage with their backers throughout the campaign. This can take a significant amount of time and effort, which can detract from other areas of the business.

There are two main types of crowd funders – those who raise capital for themselves, called micro-investors, and those who seek investment for someone else, known as angel investors.

2. Venture Capital

Venture capitalists are investors who provide funds to startups with high growth potential. VCs typically invest in exchange for equity in the company and may also offer support and guidance to help the startup grow. VC funding is often sought after by SaaS startups that require a large amount of capital to accelerate growth.

One of the advantages of VC funding is that it can provide startups with a significant amount of capital to grow their business. This can help startups scale up their operations, hire new talent, and invest in marketing and sales efforts.

Another advantage of VC funding is that it can provide startups with access to valuable expertise and resources. VCs often have a network of industry experts and mentors who can offer guidance and support to startups as they grow their business. This can be especially valuable for startups that are new to the industry or have limited experience.

However, there are also some downsides to VC funding. One of the main disadvantages is that VCs typically invest in startups with high growth potential. This means that startups need to have a clear path to profitability and a compelling growth strategy to attract VC funding. Startups that are not able to demonstrate high growth potential may struggle to attract VC funding.

Another disadvantage of VC funding is that it often comes with strings attached. VCs typically take a significant amount of equity in the company in exchange for their investment. This can dilute the ownership of the founders and limit their control over the direction of the company.

3. Bootstrapping

Bootstrapping refers to funding a startup with personal savings, revenue generated by the business, or loans from friends and family. Bootstrapping can be a good option for SaaS startups that have limited funding options or are just starting out. It can also help the startup retain more control over its operations and direction.

One of the advantages of bootstrapping is that it allows startups to retain complete control over their business. Since the founders are not beholden to outside investors, they can make decisions that are in the best interest of the company without having to seek approval from outside parties.

Another advantage of bootstrapping is that it can help startups build a lean and efficient operation. Since the founders are using their own resources, they are often more cautious about spending money and may focus on building a sustainable business model from the outset.

However, there are also some downsides to bootstrapping. One of the main disadvantages is that it can be difficult to raise a significant amount of capital through bootstrapping alone. Startups that require a large amount of capital to accelerate growth may find it challenging to do so through bootstrapping.

5 ways for successful bootstrapping:

• Start with MVP (Minimum viable product)
• Outsource development
• Choose the right technology stack
• Study and adopt lean software development practices

There are many benefits of bootstrapping:

First, it helps entrepreneurs save time and resources by avoiding the costly initial investment required to start their companies.

Second, it allows them to focus only on growing their business instead of worrying about hiring employees, paying taxes, etc.

Thirdly, they get to retain ownership over their businesses.

Lastly, bootstrapping enables entrepreneurs to build strong relationships with customers and suppliers.

In addition to saving time and money, it also provides entrepreneurs with the opportunity to develop long-term relationships with clients and partners. This means that they can offer better services and provide better customer support.

4. Angel Investors

Angel investors are high-net-worth individuals who provide early-stage funding to startups in exchange for equity in the company. Angel investors can be a good option for SaaS startups that are looking to raise a smaller amount of capital than what is typically provided by VCs.

One of the advantages of angel investing is that it can provide startups with a significant amount of capital to accelerate growth. Angel investors often have deep pockets and can invest in startups that are not yet ready for VC funding.

Another advantage of angel investing is that it can provide startups with access to valuable expertise and resources. Angel investors often have experience in the industry and can offer guidance and support to startups as they grow their business.

5. Series A, B, and C funding

Series A Funding

Series A funding is the most common form of startup financing. It is often considered the first step towards building a successful company.

These funds are provided by venture capitalists who invest in young companies hoping to become profitable businesses. If you want to raise Series A funding, you should create a pitch deck.

In other words, you need to present your startup to potential investors. Make sure your pitch is concise and tells them why you are worth investing in. Also, make sure you include information about your team, vision, company growth plans, etc.

Series B Funding

Series B fundraising enables entrepreneurs to raise additional funds beyond their seed round. 

The main reason companies raise Series B rounds is because they want to expand their operations, hire new employees and launch new products. Of course, raising additional funds helps them reach these goals faster.

Series C Funding

Series C funding is a great way to get additional resources without diluting ownership. A startup company raising its Series C funding has a strong growth trajectory, high valuation, and proven management team. 

These characteristics indicate that investors are confident about the future prospects of the company.

6. Launch a lifetime deal to raise funds:

The term ‘lifetime deal‘ is often used to describe a fundraising event where investors pay a fee in exchange for exclusive access to a company.

This type of investment usually comes at a premium price because the investors expect a significant return over time.

This fundraising strategy allows businesses or non-profit organization to take advantage of large amounts of funding from individuals who want to support them. 

Wrapping up

A successful investment from a VC firm has the potential to double, triple or even quadruple your company’s value within a short period of time.

To gain traction, in today’s crowded marketplace, you must have access to capital.

If you’re a startup company, your choices are limited. However, some of these are flexible like angel investors or launching a lifetime deal.