Spinoff Toolkit: Financing

Early-stage funding is essential to grow and sustain the new company. Traditional funding like bank loans are often not accessible to most new ventures until later stages, due to the associated risk and financial uncertainty. However, there are other funding options including angel investment, grants, government programs and eventually venture capital.

New ventures tend to prioritize ‘non-dilutable’ funding - meaning financing that does not require equity in exchange. Grants, loans, and government support programs are an example of this and are available for new companies, though terms may change year-to-year. 

In later stages, companies become more established and find larger (often dilutable) sources of financing like banks and venture capital are most appropriate to support the next stage of growth. Eventually, founders complete a business “exit”, referring to the founder’s departure from the business through which their ownership stake is liquidated and they receive profit in return. Mergers, acquisitions or sale of the company are common business exits.

For more information on what types of funding may be available, contact TTS.


External Resources

 

Early-Stage

Friends, Family and Personal Finance

The first investors to a company are often people close to the entrepreneur who believe in their vision for a business, in addition to the entrepreneur’s own personal investment. 

Angel Investors

Angels investors are private investors who generally invest in early-stage companies. They may or may not invest as a group. 

  • Sprout Fund: An Edmonton-based angel investor group targeting early-stage technology companies.
  • Valhalla Angels: An early-stage angel investor group operating in Edmonton and Calgary.

Crowdfunding

A method of financing gaining popularity for start-ups that create consumer products is to use crowdfunding platforms like Kickstarter, Wefunder, and Indiegogo. Businesses on these platforms make a case for their innovative or novel product and set fundraising goals to attract investment from future customers, often in exchange for first access to the company’s products. 

 

Early - Mid-Stage

Grants (Non-exhaustive list)

Government of Canada Strategic Innovation Fund: Federal government funding for companies of all sizes to invest in R&D, scale their business, or attract new investment through an initiative.  

Government of Canada Business Grants and Financing: A directory and applications to various federal funding initiatives including: economic recovery, wage subsidies, grants, R&D contracts, minority-owned businesses, and business grants.

Government of Canada Supports For Technology Companies: Information and links to grants, programs, and innovation centres that support small and medium-sized technology companies.

The Government of Alberta offers small business support and funding through various programs.

Alberta Innovates: This government corporation provides a variety of funding opportunities, access to industry contracts, and support programs for start-ups companies in Alberta.

  • Voucher: Funding up to $100,000 towards utilization of up to three service providers for development of a business or technology.
  • Micro Voucher: Funding up to $10,000 towards utilization of a service provider for business, engineering, product development, patenting or related development activities.
  • Tecterra - A funding and support entity for companies specializing in geomatics technology.

GreenStem: A government of Alberta funded program which enables entrepreneurship pathways for University of Alberta STEM graduates with innovations related to emission reductions.

National Research Council of Canada Industrial Research Assistance Program (NRC – IRAP): A federal program that offers funding for technological innovation and compensation to offset new graduate hires.

 

Mid - Late-Stage

Bank Loans

After building a business and operating for several years, new companies may have enough collateral or financial resources to justify a loan from a banking institution to finance their next stage of growth. These funds may be granted with specific terms and conditions for use and must be paid back with interest.

Venture Capital (VC)

VC funds are private investors that commonly invest large sums in relatively early-stage companies that have high growth potential. They often focus on very specific industries, company structures, or technologies. Please connect with TTS for access to more information on sources of venture capital.

 

Late-Stage

Acquisitions & Mergers

Being acquired by another company is a common business exit for successful start-up companies. A company may also merge with another to gain new business resources, reduce competition and become a more attractive target for investment.

Initial Public Offering (IPO)

An IPO is a type of equity financing where a company officially becomes “public” -meaning it begins to sell ownership shares publicly instead of just privately. This process requires partnership from a financial institution and is a complex process that marks a major milestone in a company’s growth.

Private Equity

Private equity describes a firm or fund of private investors that invest in individual companies to gain a controlling stake, thereby “buying” the company. The private equity firm then controls the company and invests in it, usually to prepare for an acquisition or further investment.