After reading IEEE Fellow Chenyang Xu’s suggestions for the four actions engineers can take to help their startup succeed, several readers asked him for guidance on pathways to get seed financing for starting a venture. Xu has been working with and advising entrepreneurs and investors since 2002.
“Raising funding is one of the biggest challenges an entrepreneur can face,” Xu says. “When engineering founders start to build a company, they often do not realize there are multiple pathways for seed funding. Knowing all the available funding sources can help them choose the right approach.”
Before you start asking for money, Xu suggests, make sure your idea is worthy of building a company around. Get feedback about the viability of your planned venture from contacts who have commercial and investing experience in the targeted technology and market spaces, he says.
“Many engineers think they can launch a startup based on an expansion of a product’s features or functions they’re working on, but these ideas are too narrow,” Xu says. “You need a game-changing technology or product combined with an innovative business model that addresses unmet market pain points.”
Once you have a solid business plan and a working prototype, check out the following six sources of funding to get your venture off the ground.
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