HomeOpinionThe importance of financing programs for startups. By Francisco Paredes, director of...

The importance of financing programs for startups. By Francisco Paredes, director of business strategies at Altum Lab

Many are the companies that have gone through government support programs, where they receive equity-free financing (without ceding ownership interest) to improve the product, service or model that the venture has. Government initiatives are not always viewed favorably by taxpayers, who doubt whether public resources are really being used appropriately.

On the other side, we find Venture Capital, where private investment in this type of venture has the main purpose of obtaining economic benefits for investors.

In both types of programs, with the injection of capital and ideally knowledge, an exponential growth of the startup is expected, but several times it happens that projects with ideas that seem to be disruptive are not selected.

Why was my startup not selected?

A good idea is not enough for a business to be successful and many of these companies are not selected because they lack key characteristics that allow their growth. This is precisely the cause of a program being successful or not, if the company does not grow, does not generate employment or contribute taxes. Do not expect to be selected just because you have a good idea, you must support it with a structure that allows it to be implemented and turned into a sustainable business model.

The selection of enterprises is not an easy task. Thousands of companies apply every year to the different programs, it is an exhausting task that seems endless. However, this process is essential to project which ventures have the greatest probability of success, where not only the idea is evaluated, but also the team, dedication, experience, business model and context where it is developed, as well as the scope, market and competence. All this mix of attributes are those that are taken into account to select, being the main problem of the programs that have not had the same repercussion, because when choosing enterprises that do not consider these characteristics, the impact decreases and the continuity of the program is totally exposed. program.

Long-term results

Several government initiatives to boost the entrepreneurship ecosystem have been discontinued, either because no results were seen in the short term, or simply due to changes in the government. It is essential that these programs are a long-term state policy and that they are not interrupted by political differences, this has allowed countries with a great development of the ecosystem to remain leaders in the generation of ventures with impact.

Thinking about obtaining short-term results only happens exceptionally and efforts should be focused on improving the evaluation, advice and support given to startups as resources are awarded.

Financing is for all startups, and it is one of the most important barriers in the growth process, but not the only one. They are not necessarily business development experts. Their teams – although they may be experts in the solution – often need to shape the business model and thinking that a company will become sustainable over time just because of the product, without generating income, is not viable. Many companies apply and acquire financing over and over again without obtaining tangible results, thinking that promoting the product is the only important thing.

In this, many programs are in debt, including investment funds that expect exponential growth only by providing financing. Simply providing capital is not enough, but there is a real commitment to open contact networks that generate new business and added value to the startup where they are investing. Programs that are capable of offering a mix between financing and real support for business development are surely the best option for entrepreneurs and for the continuity of these programs.

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