Challenge: For first-time entrepreneurs, navigating the array of funding options to find sufficient capital can be onerous. One reason this process can be so complicated is that investment options vary based on what stage of development the company is in. A company that has yet to develop a prototype would have very different funding options than a company that is nearly ready to go to market with its product. Because many entrepreneurs do not have any readily available tools to help them navigate the myriad of financing options available in their state and around the country, this challenge can inhibit the growth of innovative startup ventures.
Solution: State leaders could create a simple online capital locator tool to help entrepreneurs identify the type of capital that is appropriate for their company’s maturity level and industry. The tool would consolidate the sources of funding found both in-state and nationally and be filtered by industry and maturity level. Furthermore, the tool could also consolidate the in-state entrepreneurial resources available by type and region, such as incubators, accelerators, and mentor programs. Collecting this information in one easy-to-use place and allowing users to filter the information in useful ways could save entrepreneurs valuable time. Furthermore, it could connect entrepreneurs with funding options and entrepreneurial support they may not have found on their own.
Example: Michigan has simplified the process of searching for funding by creating a free capital locator tool. Hosted by the Michigan Economic Development Corporation, the tool lists roughly 150 potential sources of capital. The tool divides the sources by category: venture capital firms, commercial banking resources, state programs, federal programs, web resources, business plan competitions, and business services. Entrepreneurs can utilize the tool to narrow down the funding sources by the stage of businesses they fund. Specifically, users can identify whether they are looking for funding for a business in the idea stage, the start-up stage, the growth stage, or the mature stage. Additionally, the tool offers the ability to filter capital sources by thirteen industries, including alternative energy.