From accelerators to venture funds, learn how to finance your student startup.
Many students enter university or MBA programs with the intention of starting their own businesses, and starting a company while still in college can provide valuable experience. Once you have an idea and plan for your business, looking for funding is the next step. This guide will help you find resources for students that can help you get your business off the ground.
Why It’s a Good Time to Look for Funding
Choosing to create a startup business while still enrolled as a student can be an intimidating prospect, but there are significant benefits to embarking on this step. While students are still in school, they have the option of participating in programs designed for student entrepreneurs, which can provide invaluable opportunities to network, receive mentorship, refine a business plan, connect with funding sources, and create a strong pitch for potential investors. University funds, university-affiliated angel networks, and accelerator programs for students can provide assistance.
Venture capital funds are thriving due to low interest rates, meaning that there is a large amount of funding available. Although it’s common for investors to focus on more established, profitable startups, funds focusing on student-run startups or early-stage startups are available for young entrepreneurs. Successful startups have been founded by students, and the experience of running your own startup while at college can provide crucial experience for future business ventures.
How to Find Startup Funding
Startups often rely on their founders’ own savings and funds from family and friends, but there are multiple other sources of funding that can provide financial support to students as they start a business. Once you have decided on your business’s focus, it’s a good idea to start searching for funding sources. There may be resources available based on the type of business you plan to start—for example, businesses focusing on clean energy, education, tech, or solutions for social problems may be able to find specialized funding.
Your university’s business and entrepreneurship programs are a good place to start networking and finding resources. Some venture funds employ student scouts who source promising entrepreneurs to invest in.
Types of Startup Funding for Students
There are a number of types of funding for student startups. These include:
Venture Funds and Grants Aimed at Students
Some venture funds and grants are aimed specifically at student-run startups, while others focus on early funding and may be appropriate for student ventures.
|8VC||8VC focuses on technology startups that have a positive economic and societal impact.|
|Alsop Louie||Alsop Louie works with student associates at universities across the country and seeks out innovative ideas for startups.|
|Bolt||Bolt focuses on pre-seed venture funding for companies in the technology industry.|
|Bow Capital||Bow Capital is an early-stage venture capital fund founded in partnership with the University of California system.|
|Contrary Capital||Contrary Capital invests in university-started companies, including those started by current students, recent graduates, faculty, and dropouts. Contrarys fellowship program offers professional help and mentorship as well as funding opportunities. Contrary also offers guides about how to launch a startup at over 35 universities.|
|CRV||The CRV team works with student campus scouts to find new and promising startups.|
|Dorm Room Fund||This student-run investment fund offers $20,000 grants to student-run startups in the U.S. and Canada. Special programs are available to support startups founded by underrepresented students.|
|Pear VC||Pear offers pre-seed and seed funding to both students and experienced startup founders and will invest in further funding rounds as your company grows. Pear assists with networking, recruitment, and other resources.|
|Rocketfund||This grant fund is available for startups focusing on sustainability and clean technology, offering $25,000 to $75,000 in non-equity grants.|
|Rough Draft Ventures||Rough Draft Ventures provides venture capital to student entrepreneurs in the technology industry. A community of peers, mentors, and investors is available to help students create their startups. The fund offers up to $25,000 in funding to early-stage startups.|
|Sequoia Capital||Sequoia Capital offers early funding to new startups and has a scout program seeking new entrepreneurs.|
|The House Fund||The House Fund makes pre-seed and early-stage investments in startups with at least one founder who is a student, alumni, faculty member, or affiliate at UC Berkeley.|
|The MBA Fund||The MBA Fund provides early-stage funding to student and alumni founders from Harvard, Stanford, and Wharton.|
|VentureWell E-Team Grant Program||VentureWell's program offers funding to science and tech startups with a social, health, or environmental impact. Up to $25,000 in grant funding is available. The program also takes the role of an accelerator, offering training, networking, and mentorship opportunities.|
|Xfund||Xfund is an early-stage venture capital firm that partners with startups founded by students and alumni from research universities in the U.S. and abroad.|
University Accelerator Programs
Accelerator programs can help students prepare startups for launch. These programs typically offer mentorship and training, opportunities to pitch to investors, and funding. University-affiliated accelerator programs are common, so it’s a good idea to check with your university’s entrepreneurship centers for opportunities. Large universities may have multiple accelerator programs. Some accelerator programs accept applicants from all universities.
Some university accelerator programs include:
|Berkeley Free Ventures||The semester-long Free Ventures program connects student founders with mentors who can provide advice and resources. Students can take advantage of equity-free funds, workshops, banking assistance, and fundraising guidance.|
|Cornell eLab||Cornell's year-long program offers training, opportunities to speak to potential customers and pitch to investors, and a network of alumni.|
|MIT Delta V||MIT's Delta V accelerator is a summer program that helps teams identify their target market, conduct market research, experiment with potential customers, and take advantage of mentorship, seminars, and simulated board meetings.|
|NYU Game Center Incubator||NYU's game development-focused incubator is a year-long, part-time program offering $10,000 in funding, mentorship, workshops, and a public showcase.|
|NYU Summer Launchpad||NYU's nine-week accelerator offers coaching, customer development training, legal and account assistance, and $10,000 in funding.|
|Pennovation at UPenn||Pennovation is a six-week accelerator program that provides weekly educational sessions from subject matter experts, mentorship, and pitching opportunities.|
|SkyDeck||UC Berkeley's SkyDeck program accepts startups founded by UC Berkeley undergraduates, graduate students, alumni, and other affiliates. The six-month program invests up to $105,000 in participating startups.|
|Stanford Launchpad||Stanford's long-running program helps students launch their business within 10 weeks. Support and networking continue during and after the program.|
|Stanford StartX||Stanford's StartX offers the Student-in-Residence scholarship, a six-month program that offers up to $9,000 in funding, opportunities for education and coaching, and access to StartX's network of entrepreneurs, investors, faculty, and alumni.|
|Tsai Center for Innovative Thinking at Yale Accelerator||Yale's accelerator program guides teams through workshops, mentorship, and funding opportunities. At least one team member must be a full-time Yale student.|
|UCLaunch||This accelerator program is open to students throughout the University of California system. Judges select the most promising applicants, who are paired with mentors in a three-month program that helps them refine their business plan.|
|Venture Lab at Georgia Tech||Georgia Tech students and faculty members can receive funding from a number of sources as well as support from entrepreneurs.|
|Wharton VIP-X||Wharton's VIP-X is a three-month accelerator program that provides resources and mentoring to startups that are near launch. Advising, workshops, and seed funding are available.|
|Weiss Tech House||University of Pennsylvania's Weiss Tech House is a student-run center that supports students as they develop and commercialize innovative technologies.|
Accelerator programs that are open to founders from many universities include:
|Envision Accelerator||Envision Accelerator is dedicated to providing funding and networking opportunities to young founders from underrepresented populations. A 10-week program helps founders develop their business, with mentorships, workshops, and up to $10,000 in funding.|
|Pear VC Accelerator||Pear’s accelerator offers a $150K SAFE for 5% plus an optional $100K SAFE at a $10M cap. Participants will receive mentorship, assistance with recruitment, and additional opportunities to secure funding.
|Y Combinator||Y Combinator focuses on early-stage startups. In addition to providing seed funding, participating startups receive three months of intensive support, networking opportunities, and a Demo Day during which founders can present their startup to top investors.|
University-Backed Venture Funds
Some universities offer their own venture fund programs designed to invest in student startups.
- Colorado State University CSU Ventures
- Cornell University BRV
- Indiana University Innovate Indiana
- NYU Innovation Venture Fund
- Oregon State University Funding Opportunities
- Penn State University Garber Venture Capital Fund
- Portland State University Venture Venture Development Fund
- Stanford GSB Impact Fund
- UCLA Ventures
- University of Colorado Denver Rutt Bridges Venture Fund
- University of Minnesota Venture Center
- University of Rochester Simon School Venture Fund
- University of Tennessee Knoxville Boyd Venture Challenge
University Angel Networks
Some universities are connected with angel networks, often made up of alumni investors who will provide financial support to promising startup ideas. Regional networks may also be available. Online sources such as the Angel Capital Association directory can help you find sources.
- Baylor Angel Network
- Berkeley Angel Network
- Carolina Angel Network
- Columbia Angels
- Duke Angel Network
- Harvard Alumni Angels
- MIT Alumni Angels
- Stanford Angels and Entrepreneurs
- University of Virginia Angels
- Wharton Angel Network
- Wharton Alumni Angels
Additional Sources of Funding
Accelerator programs and investors are not the only places to find funding for your startup. It’s a good idea to investigate all possibilities as you plan your funding. Additional sources of funding include:
Business Plan Competitions
If you have a strong business plan, entering a competition can be an excellent way to win more funding, and competitions may also offer networking opportunities that will assist your business. Some top business plan competitions include the following:
- ClimateTech and Energy Prize MIT
- Milken-Penn GSE Education Business Plan Competition
- NFTE National Investor Pitch Challenge
- Pear Competition
- Rice Business Plan Competition
- Social Enterprise Conference Pitch Competition
- Startup World Cup
- University of Oregon New Venture Championship
- Visa Everywhere Initiative
Small Business Loans
Students may have difficulty qualifying for bank loans since these loans typically require a high credit score, collateral, and strong ability to repay the loan. However, student startups may be eligible for small business loans. The U.S. Small Business Administration’s loan programs can help small businesses get loans.
Crowdfunding allows many people to provide small amounts of money for projects that interest them, often in exchange for special perks. Crowdfunding websites such as Kickstarter, Indiegogo, and Fundable are popular options to fund projects. Although crowdfunding can be incredibly successful, there are many potential pitfalls, so it’s important to research thoroughly and make sure that this method of funding is a good fit for your project.
Here are some important factors to consider before embarking on crowdfunding:
- Crowdfunding projects are most successful when they offer a tangible end product, such as games, toys, or technological gadgets, or when they already have a strong fanbase to draw from.
- Crowdfunding websites may only allow you to keep funds if the project is fully funded, so you’ll need to set your goals wisely. Some websites allow flexible funding goals.
- When you plan the rewards you will offer to your backers, it’s easy to overstretch yourself and promise rewards that will be difficult or impossible to deliver. Keep your plans realistic.
- Make sure that you can complete your project with the amount of money you set as your goal. It’s easy for the scope of a project to increase over time, making it difficult to finish even with a fully funded crowdfunding goal.
Government grants typically target specific types of businesses working in industries that benefit communities or solve public issues, and they may require businesses to be fully operational before applying. However, depending on the nature of your startup, you may be eligible for this type of funding, so it’s wise to search through the available grants. You can search for government grants through these websites:
- America’s Seed Fund
- Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs
Regional Funding Opportunities
It’s a good idea to search for funding opportunities in your local area. Many states and cities offer grants or competitions for new businesses to encourage economic growth in their region. Regional angel networks and venture capital opportunities may be available as well. Here are a few examples:
- Blackstone Entrepreneurs Network Colorado
- California Crescent Fund
- Southern Connection
- University of Minnesota’s MN Cup for businesses in Minnesota
Many universities offer their own funding programs for student entrepreneurs, but even if there is no funding available from your school, universities can provide many opportunities for networking. Check with your university’s business school or entrepreneurship programs and talk to professors. They may be able to connect you with funding opportunities, mentorships, and organizations that can help you meet potential investors.
AdvisorSmith spoke with the following experts to provide critical insight on startup funding for students.
Q. How should student startup founders determine that they are ready to seek funding?
Craig: Get as far down the racetrack as you can before you have to start asking for funding. It’s a good exercise to figure out how many resources you need prior to making the financial ask of someone else. Ask yourself, “Can I resource or bring on a co-founder to do the work ourselves to get to a working prototype before asking for funding that will take my equity down too early in the process?”
Linda: LaunchPad ventures at Syracuse University have raised more than $43 million in outside equity investment. That’s a pretty impressive amount for student startups. To get founders ready to approach funders we put them through an intensive “investment-ready” process that focuses on customer discovery and validation, along with product development and a business model roadmap.
We are a very mentor-driven program so the rigor of our process, along with the engagement of subject matter experts to help achieve key milestones, helps “de-risk” investments by funders. It gives founders a realistic sense of what will be expected by investors and gives funders the confidence that student startups are receiving the technical assistance and strategic advice they need to help them succeed.
To get founders ready we put them through campus, state, and national business competitions to refine their pitch and be ready to answer tough questions from funders. We help them test every assumption so they are approaching investors having done the hard work of research and external validation. We make sure they have both the hard and soft skills required to helm a startup. That means product and market expertise, but also the tough stuff that goes into being a student founder—team building and conflict resolution, decision-making and delegation, discipline, problem-solving, and resilience.
Rhonda: The same “funding readiness” rules apply to all startups—there must be evidence of product-market fit, preferably in the form of sales. Investors of all types are looking for this traction as evidence that the company has eliminated most of the risk and is ready to scale sales.
Q. What are the first or best places students should seek funding?
Craig: Normally, sweat equity should be first. A lot of investors want to see you put your own money into it. Then ask friends and family. They trust you, know you, have confidence in you, and can help you a tremendous amount. Then move into boutique PE firms or family funds before you go into larger VC or grander Series firms.
Q. How can student founders help their startups stand out when looking for funding?
Craig: Getting a solid prototype should be number one. In short order, you want to understand who your customers are and progressively, who they will be. You want your metrics memorized, like what your customer acquisition costs are. Know the ins and outs, breathe your business, inside, outside, and upside down. Know the business and know your numbers.
It’s important to have and recruit experienced talent on the team when you want to be taken seriously. Investors are investing in the industry as the vehicle based on information they may already know, and you are one driver of many, taking strides in that industry. To be the best, you want to be efficient, strategic, and competitively advantaged.
Q. What are investors looking for when they evaluate student startups?
Linda: It’s interesting how this has changed in the past few years. In the past, investors have been more focused on business plans and financial projections. Now, it’s rare to see an investor request a written business plan, although going through that strategic process is an important learning experience for a student founder.
Now, it’s all about the team and the market. Funders invest in people over ideas, so they are looking for core strengths in a founder. They are looking at the quality of the team and advisors. They are looking for work ethic as well as the quality of the work.
They are laser-focused on path to market. They want to see actual users and an impressive waitlist. They want to see traction, demonstrated market demand, and a solid MVP. We give student teams a very long list of questions they should be ready to answer to help pitch and to prepare for evaluation and the diligence process.
Rhonda: Student founders will be expected to leave school upon receiving any type of substantial funding. I know of three cases just this year (two undergraduate companies, one first-year MBA company). In these cases, investors cared more about the velocity of month-over-month growth than the experience of the team and didn’t hold their traction to a higher standard than for non-student founders. Student founders don’t necessarily get dinged for inexperience, but coachability is a “must-have.” Investors can usually replace the parts of a founding team they deem ineffective.
Craig: It always helps to have an advisor on board to supplement the experience for an investor. When an investor is working with a student, they may assume that the student hasn’t grown a company before, so there’s a lot to cut their teeth on.
Additionally, investors like to see that a student expresses a realistic understanding of what things cost to fund the business, and how to use the funds they are given. Too often, a student will undervalue certain costs and overvalue others. Use mentors, advisors, and your network at large to arrive at the best answer here.
Q. What are some common mistakes that students should avoid when looking for funding?
Craig: Going too early is a big mistake. You give away a lot of your company in the early stages when it’s worth nothing. Find a way to get a little further down the road to a prototype or even to your first paying customer (known as revenue-generating vs. pre-revenue before asking for investment).
Q. Is traditional venture capital still the best source of funding for student founders, or are there viable alternatives?
Linda: Student founders need to understand the entire capital continuum. Pre-seed investors have moved farther along the early stage continuum and want to see customers. That means student startups have to be extra resourceful about finding non-dilutive funding.
Early sources of capital typically include bootstrapping, sweat equity contributions from founders and team members, personal investment, financial support from family and friends, and winnings from business plan competitions. Mounting a successful crowdfunding campaign can help with funding and just as importantly demonstrate market enthusiasm.
Many campuses, like Syracuse University, offer funding programs to help student ventures with small grants for research, prototyping, legal incorporation, and patent work. Many places also offer grants through community-based incubators because they know that funding local student startups is a smart talent-retention strategy. We strongly advise students to apply for accelerator programs which are great avenues for networking and initial investment capital. We have a strong partnership here at Syracuse University with Techstars which has been an amazing collaborator.
In addition to traditional VC, we also encourage students to explore low-cost working capital SBA loans, as well as alternative lenders such as non-profit CDFI’s or banks. Finally, we really drill down on early sales because earned revenue is the most capital-efficient way to fund a startup. And sales make a startup most attractive to eventual venture investors.
Rhonda: There are multiple alternatives to venture capital for student startups—non-dilutive funding such as SBIR grants can be valuable resources. Each federal agency has a slightly different program (NSF, NASA, NIH, DOE, etc.). For example, NSF’s SBIR programs have three phases and offer up to $1.5 million in non-dilutive funding. Venturewell’s eTeam program is also an awesome student-focused resource—$5K for the first phase with $20K available for prototype development in the second phase.