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5th August 2019

Where does the money come from for product development?

So, you have a great idea for a product and now it’s time to bring it to market. There is a lot to keep in mind, but the main requirement is money. The question on the mind of pretty much every developer in this situation is, where does this money come from? Don’t worry, we’ve put a few options together for you below: 

Personal Funding 

Your personal bank account is the first place that you’re going to need to look for funding. Maybe you’ve had a lucrative business in the past and are now looking to fund the development of your new idea. The Bank of Mum & Dad, and other relatives willing to fund part of your financial needs also fits in here. Perhaps you’ve won the lottery or have a very generous aunt. Either way, you are going to need to fork out some money to get the development process underway. 

Bootstrapping  

Similar to dipping into your own funds, bootstrapping allows you to get your project started. However, it is done at a much slower pace which allows you to keep your finances in check while still progressing with your project. You may consider a part-time job that coincides with this to keep a flow of revenue into your product development. 

If you can bootstrap your business until there is, at least, some revenue coming in, you will be in a far better position to raise external investment.

External Investment 

If you aren’t able to rely on personal funding to get your product to market, you may want to look into external investment. This can be in the form of borrowing from investors or taking out a loan. Alternatively, you can try your hand at crowdfunding or equity funding. These are all good options that provide you with the necessary funds but will come at a cost at some point down the line.

External investors will look at what progress you have made using your own personal funds before they will invest in your business. There are very few external investors who will invest in something when you haven’t invested yourself. 

R&D Tax Credits 

R&D tax credits are a lifesaver for serial development companies. This allows your company to claim tax relief if you are spending money on research and development. So if you are continually researching and developing new products or making alterations to existing products, check your eligibility for R&D tax credits. The R&D from previous projects can help pay off a chunk of the next one. 

Overall, navigating the world of product development is no easy task, especially when you are unsure of where your funding is coming from. The best way to approach the money side of product development is to be realistic with how much you will need and where you are going to source it. Hopefully, this article has brought clarity to the different avenues from which your project’s funding may come from. 

If you have any further questions about product development and funding options, get in touch. We’re happy to pass along any new information we may have!