Where Startup Funding Really Comes From – a Canadian Perspective

A recent article in Entrepreneur Magazine gave us a reality check on startup funding in the US.

Prominent VCs and angel investors may dominate the headlines with their big sticker investments, but personal loans and credit – along with investments from friends and family – make up the lion’s share of funding for startups in the U.S.

According to data compiled by Fundable, only 0.91 percent of startups are funded by angel investors, while a measly 0.05 percent are funded by VCs. In contrast, 57 percent of startups are funded by personal loans and credit, while 38 percent receive funding from family and friends.

Read more: http://www.entrepreneur.com/article/230011#ixzz2nvdR0VpL

The topic was intriguing and the “infographic” visually interesting if not all that informative. So I set about deciphering what it meant by putting the data into a form where each source represented a percentage of total funding. Then – I assumed that the data was accurate and similar in Canada – I looked at the data from a Canadian technology company’s perspective.

Based on my experience, tech startups in Canada put about as much as half their funds into eligible product development. The result is that there are 3 sources of funds that hit the radar:

  1. Founders Personal Funds (46%)
  2. SR&ED (23%)
  3. Friends & Family (23%)

Together these 3 sources probably account for about 92% of funding for tech startups in Canada

Published by Rob Farrow

accountant, entrepreneur, former chef, occasional artist, angel investor, business advisor, corporate tax specialist