Raising Money to start your own Health Technology Business

Mar 13, 2023

Starting a small business or a startup is an exciting journey. However, without sufficient funding, it can be challenging to turn your business ideas into reality. In this article, we will discuss various types of funding options available for small businesses and startups, including borrowing money yourself, seed funding, equity crowdfunding, and venture capital funding. We will also explore how to create an expert advisory panel to increase your chances of raising money.

Borrowing money yourself

One of the most traditional ways of funding a small business or startup is to borrow money yourself. This type of funding is also known as bootstrapping. Bootstrapping involves using personal savings, credit cards, or loans to fund the business's initial costs. The primary advantage of bootstrapping is that you retain complete control of your business. However, it can be challenging to access significant funding through this method.

Seed funding

Seed funding is an investment made by investors or venture capitalists to help startups get off the ground. Seed funding usually happens in the early stages of a company, where the business is still in the idea or prototype phase. The primary goal of seed funding is to help businesses develop a working prototype and validate their concept. Seed funding is usually a small investment, and investors often ask for equity in return for their investment.

Equity crowdfunding

Equity crowdfunding is a newer method of funding for small businesses and startups. It involves raising capital from a large group of investors, often through online platforms. Investors can buy shares in the company, and the business owner retains control of their business. Equity crowdfunding has gained popularity over the years, and it is now regulated in many countries. Harnessing the energy and support of an army of passionate followers can work really well in a Healthcare start up as the investors can themselves be the main ambassadors and vocal champions of your business as they are invested - literally, in it!. The networking power of a large group of Doctors for example can be very powerful in driving the business opportunities. Seedrs is a good example of such a platform. 

Venture capital funding

Venture capital funding is a type of funding where investors invest in a startup in exchange for equity in the company. Venture capital funding is usually divided into different stages based on the startup's development. The stages are pre-seed, seed, series A, and series B.

Pre-seed funding is the earliest stage of venture capital funding. It is usually an informal investment made by friends and family or angel investors. Pre-seed funding is often used to develop a working prototype or to validate the business idea.

Seed funding, as we mentioned earlier, is the investment made to help startups get off the ground. It is usually made by angel investors or venture capitalists, and it is used to develop a business plan, build a team, and launch the product.

Series A funding is the next stage of venture capital funding, and it is used to help businesses scale their operations. Series A funding is often made by venture capitalists and is used to develop the business further, increase the team size, and expand into new markets.

Series B funding is the last stage of venture capital funding. It is usually used to help businesses reach profitability or to prepare for an IPO. Series B funding is often made by institutional investors, and the investment amount is usually significant.

Shareholding dilution

When a company receives funding from investors, the founder's ownership stake in the company can be diluted. Dilution occurs when a new investor receives shares in the company, reducing the founder's percentage ownership of the company. Founders should be aware of the dilution that can occur with each new investment round.

Creating an expert advisory panel

Creating an expert advisory panel can help businesses gain credibility and direction. The expert advisory panel is a group of individuals with significant industry experience and expertise. The panel can provide guidance on strategy, marketing, finance, and fundraising. Having an expert advisory panel can increase a business's chances of raising money, as investors will see the business as having a strong and experienced team.

In conclusion, there are various types of funding available for small businesses and startups. Bootstrapping, seed funding, equity crowdfunding, and venture capital funding are all viable options. Founders should think carefully about the pros and cons of each type of funding and the associated risks and benefits accordingly. 

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