Insufficient financial resources are among the top reasons why today’s startups fail to achieve success in a highly competitive market. However, it is not as simple as just acquiring capital by any means possible. Successful founders will tell you that choosing the right funding options is just as important as receiving the money itself. With a wide variety of funding options available to startups including loans, investor funding, and grants, it can be challenging to find the time and energy to weigh one option over the other let alone choosing one.
During Vertical Motion’s latest Startup Strategy Workshops, our team has identified that questions surrounding funding options for small businesses and startups have been growing. To help, we decided to tap into our knowledgeable network and answer your most pressing questions. We recently sat down with Pocketed, a Vancouver-based business that “helps busy Canadian entrepreneurs easily access over $2.9B annually in grant funding” with their “free intelligent matching platform” and their “frictionless marketplace.” In our conversation with Pocketed, we explored the differences between dilutive and non-dilutive funding, what to consider when evaluating funding options, common misconceptions, and much more.
Vertical Motion (VM): Can you please introduce yourself and tell us a little bit about your background?
Pocketed (PK): Pocketed was founded in 2020 by Brianna Blaney (CEO) and Aria Hahn (CTO) in an effort to democratize access to non-dilutive funding and fuel innovation in the Canadian ecosystem. The pair have deep roots in the startup space, each launching and scaling their own businesses (Envol Strategies and Koonkie Cloud Services) and coming together in 2019 to collaborate on a joint venture, deepND Inc. Their understanding of the struggles and successes that come with running your own business was critical in the ideation and rapid scaling of Pocketed, a resource truly focused on propelling founding teams.
VM: How does your business help to support the financial needs of startups and small businesses?
PK: Billions of dollars in non-dilutive funding are available to for-profit startups and small businesses annually, but these funds are grossly underutilized by those who could benefit the most. Pocketed matches businesses to non-dilutive funding that they are eligible for, saving teams time, resources, and ensuring that opportunities aren’t missed. We then connect businesses to the supportive services they need to succeed, including grant writers, grant consultants, and grant-based financing lenders. Pocketed centralizes non-dilutive funding, making it accessible and increasing an organization’s likelihood to succeed.
VM: With regards to your business operations, what funding options are available to start-ups? Can you discuss the benefits and drawbacks related to each?
PK: Startups have several options when looking to fund their business, each with its own benefits and drawbacks. Here are some of the most popular options we get asked about:
- Business loans are a good option if you need cash today, but they will require you to pay back the loaned sum along with an added interest later. Additionally, loans typically require some form of collateral. Loans can be used for just about any project, which is great! But loans are risky since interest can pile up and if your business goes under, you may lose your collateral if you can’t pay back the loan.
- Investor funding is another option for small businesses. If a business’ pitch is well-received, they may get investments in their company from outside sources that can also provide expertise in certain operational areas. But investor funding isn’t ‘no-strings-attached’. Grant funding is non-dilutive (which means, you retain full equity of your business) while investor funding is typically dilutive, so an investor will take a portion of your business in exchange for their funding.
- Grant funding is a type of non-dilutive funding (so you retain your company’s equity) and is relatively easy to access, although this does depend on the grant. The great thing about grant programs is that there’s just about one for everyone!! There are so many types of grants, to hire students, expand market operations, etc., and they come with almost no risk. But sometimes, grants have confusing and complicated eligibility requirements which makes it difficult to identify which one is right for you. (Luckily, Pocketed takes care of that for you 😉)
VM: Are there any highly attractive financing options small businesses and startups should be looking into right now?
PK: Every startup and small business should be checking to see what non-dilutive funding is available to them today! There is nothing better than accessing thousands in low-risk funding to scale operations while retaining full equity control of their company. By creating a free account with Pocketed today businesses access billions in non-dilutive funding opportunities directed at their unique operations. There are always new programs becoming available, and we’ll keep them on track.
VM: Is there a “right time” for business owners to start looking into financing for their business? If so, what are the signs that business owners should be aware of?
PK: There is no one correct answer as to when it is “right” to start looking for business financing. Given the array of options available to business owners to access scalable funds, there is no need to rush into securing outside investment. At Pocketed, we opted to delay this process as long as it made sense to do so and to instead leverage sources, such as grant funding, that allowed us to retain equity ownership and direction of operations. Eventually, it will make sense to bring in larger amounts of funds and experienced investors as teams find themselves capping out on alternative funding sources, but that is a decision that must be made internally and among advisor networks.
VM: What should a business owner consider when evaluating what funding option is in their best interest?
PK: With the number of funding options available to small businesses, it can be challenging to identify what is right for you. Here are a few things to consider when choosing the right funding option for your business:
- Non-dilutive or dilutive? Is retaining the equity of your business important to you? Loans, donations, grant funding – they are all non-dilutive which means you are not giving away any part of your business. Investor funding might look appealing, but if retaining ownership of your business is important to you, it might be best to look at other funding options, at least in the early days.
- Do you have the cash on-hand? Loans will give you funds upfront, with the downside of you having to pay it back with added interest. Grant funding typically requires you to fund the project on your own means and then you’ll be reimbursed after reporting is complete. But if you don’t want to get a loan and you don’t have the money upfront for a grant, you can apply for grant-based financing through Pocketed which will provide you with the cash you need today to be reimbursed later.
- What are you looking to fund? If you are looking to fund a student intern for 4 months, grant funding might be best for you because there are lots of non-competitive hiring grants that don’t take long to apply to. Market expansion grants are also highly underutilized. So, what you actually need the money for within your business plays a significant role in the source of funding you choose.
- How much time do you have? Different grants take different lengths of time to complete, but there are plenty of applications that take under an hour. Loans are usually a rather quick process as well. Getting investor funding and donations/crowdfunding takes significantly longer. So, it’s important to consider your financial time frame before deciding on what type of funding you want to acquire.
VM: What are the biggest misconceptions business owners have as it relates to acquiring funding for their business?
PK: There are many misconceptions when it comes to securing business funding, and we hear a lot specific to grants. For one, business owners are hesitant to seek grant funding as they assume there are too many strings attached. In reality, grant funding is fairly ‘strings free’. Of course, there is the application process and reporting process, but apart from that, they are fairly simple to navigate. Another common misconception, and one that leaves many opportunities on the table, is that there is no grant funding applicable to ‘my business’. In Canada, there is $2.9 billion available annually to for-profit businesses. $2.9 billion. And that isn’t even touching funding for non-profits, arts & culture, academia, and more. A lot of grant programs are also flexible to industry, so you don’t have to worry if you’re not in tech. There is grant funding for everyone! Finally, one of the most prominent reasons companies are hesitant to look for grant funding is because of how confusing the grant landscape can be. Decentralized information, dated and challenging-to-navigate websites, confusing requirements. That’s why we built Pocketed – a way to democratize access to non-dilutive funding. When you create your personalized business profile, the platform matches you to grants that you’re eligible for, showing you all the application criteria in one place. And if you don’t have the time to write the application yourself, hire one of our valuable grant writers to do it for you!
VM: Are there any common pitfalls that business owners and start-ups should be aware of?
PK: When building a business, it is easy to become attached to an idea or a product you’ve developed. In most cases, this has been your life for weeks, or months, or even years. You’ve dedicated endless hours researching, planning, and executing, and you can’t imagine letting that all be for nothing. But this is a mindset that founders must cautiously navigate as it can be detrimental if not left behind.
At Pocketed, we recognize that adapting to feedback, whether it is from users or the market as a whole, can make or break a business. This is woven into our DNA. For over two years, our team built and scaled a predictive hiring and retention management system for restaurant and retail, but when the time came to move to new projects, we didn’t hesitate. This really boils down to how an organization is structured – are you and your team prepared and equipped to move fast? How big of an impact will this have on team morale? These are real considerations, but there is one idea that all teams should keep in mind. Building a business is a learning process. There is never one way to build a product and never one way to bring that product to market. Every step along the path to success is an important step, and if a project or idea is left behind, it is not because it was poor quality but rather because the team is now ready to take on a new challenge.
VM: Where can our readers go to learn more about you and your business?
PK: To access the Pocketed grant platform, readers can visit this link to build their business profile and begin searching for non-dilutive funding. As members of the Vertical Motion community, they’ll receive prioritized access today using the referral code verticalmotionX. They can also check out our website to find more information on our product and team, and if they need to get in touch, they can contact us here as well. If they’re interested in learning more about grant funding, different types of funding, or some of our top grants – our blog is the perfect place to do so! One of our most popular blogs is our Grants 101 blog. Check it out and create your account today!
Vertical Motion Inc. first met the Pocketed team through an Accelerate Okanagan event where Pocketed was offering their expert knowledge and advice on grant funding to entrepreneurs and startups. Since then we have worked with them to help provide our clients with the financial resources they need to succeed in this competitive climate. If you are ready to bring your business to the next level and see your business flourish we are here to take you “from idea to execution and beyond.” Drop us a line and let us help you take off to new heights! 🚀
Written By Tyler Mikitka, communications officer on the bridge at Vertical Motion.