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Prakhar SharmaTop Contributor
Social media marketer, Content Writer
Asked a question 3 years ago

What sources of external financing are used by innovative startups?

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Prakhar SharmaTop Contributor
Social media marketer, Content Writer

Banks are reluctant to provide investment loans to newly established startups based on their development on innovative technologies. In such a situation, innovative startups are created and financed from such external sources of financing as investment funds, business angels, issue of securities, crowdfunding and others.

In some countries such as Japan for example, prior to initiating existence, start ups perform evidence-based and word-of-mouth research on the market demand for a product they might be interested in developing.

Once such a need is ascertained, future start up co-founders make an "alpha" version of the product and engage in a series of presentations with mid- and high-level management of companies that might be interested in co-investing/ selling the product - i.e....

Japanese start ups try to carve up a niche on the market by being the first new-comer in a product segment, rather than competing with already existing products/ companies.

Apparently, these tactics minimize the chance for failure in the first year of start-ups' existence.