Understanding the Differences Between Startup Fundraising Services with ThatRound

Navigating the world of startup fundraising can feel like trying to solve a complex puzzle. With various options available, each with its own set of advantages, challenges, and costs, it's crucial to understand which path is right for your startup. At ThatRound, our mission is to simplify this process by offering a transparent, interconnected ecosystem where startups can seamlessly connect with the right investors and fundraising services. Let’s explore the key differences between the primary types of startup fundraising services ThatRound offers.

1. Online Platform

Overview: Online platforms have revolutionised the fundraising landscape by providing startups with an accessible way to connect with a global network of investors. These platforms allow startups to pitch their ideas, share financial projections, and engage with potential investors, all through an easy-to-use online interface.

Fee Structure: Typically, online platforms charge a subscription fee based model, either monthly or annually for access to the platform. Some platforms may also charge additional fees for premium services, such as enhanced visibility or tailored support.

Who It's Best For: Startups that are looking for a broad reach and quick access to a diverse group of investors. It’s particularly beneficial for those who have a strong online presence and can create compelling digital pitches.

2. Angel Networks

Overview: Angel networks consist of wealthy individuals who invest their personal capital into early-stage startups. These investors often bring more than just money to the table, they offer valuable mentorship, industry insights, and strategic connections. There are many different groups of Angels across the UK, but also globally that come together to streamline their investing. They are typically set to a particular location because of their preference to meet physically to see pitches from Founders.

Fee Structure: Startups typically pay a small success fee, usually between 3% to 5% of the funds raised, or offer a small equity stake in their company. The angels themselves may sometimes pay a membership fee to be part of the network.

Who It's Best For: Early-stage startups that can benefit from the experience and connections of seasoned entrepreneurs and business leaders. Angel networks are ideal for companies looking for more than just capital. They are also great for startups who have a connection to their local area, as Business Angels may look to support something close to them and it makes meeting in person easier.

‍3. Investment Club

Overview: Investment clubs are groups of individuals who pool their resources to invest collectively in startups. This setup allows investors to share risks and benefits while leveraging the collective knowledge and experience of the group. They are quite similar to Angel Networks, though typically smaller in size, perhaps 5-10 people.

Fee Structure: Investment clubs are typically free of charge as the investors have minimal running costs other than their time in studying pitches and doing the due diligence.

Who It's Best For: Startups that are looking to avoid any fees and are are comfortable negotiating with a group of investors rather than individuals. This option is particularly useful for startups that can benefit from a diverse range of investor expertise.

4. Crowdfunding

Overview: Crowdfunding platforms allow startups to raise funds by reaching out to a large number of people, usually through online campaigns. This method is especially popular for consumer-facing products and services that can attract widespread public interest.

Fee Structure: Crowdfunding platforms typically take a percentage of the funds raised, usually between 5% to 7%. Additional costs may include payment processing fees and the cost of fulfilling rewards if applicable.

Who It's Best For: Startups that have a product or service with mass appeal and can generate excitement among a large audience. Crowdfunding is also ideal for companies looking to validate their product-market fit and is typically considered a marketing exercise alongside the funding benefits

5. Institutional Broker

Overview: Institutional brokers are professional intermediaries who connect startups with larger sources of capital, such as venture capital firms, private equity, or institutional investors. They bring a high level of expertise and can facilitate significant funding rounds.

Fee Structure: These Brokers have a diverse range of fee structures. They typically charge an upfront fee as their costs in bringing on a new startup can be high, they may also charge a monthly retainer and success fee, ranging from 3% to 7% of the capital raised. 

Who It's Best For: Startups further along in their growth journey, perhaps looking at Series A round, seeking large-scale investments and needing help navigating the complex negotiations involved in securing institutional funding. It’s ideal for businesses ready to scale and requiring significant capital.

6. Fundraising Service

Overview: Fundraising services offer end-to-end support for startups looking to secure funding. These services include strategic guidance, investor connections, and assistance throughout the fundraising process, making them a comprehensive option for startups at various stages.

Fee Structure: Fundraising services generally charge a mixture of an upfront fee and retainer . Some may also charge a success fee. This model ensures that the service provider is motivated to help the startup succeed, but covers their running costs of what is typically a more “hands on” job of fundraising.

Who It´s Best For: Startups that need tailored support and strategic guidance throughout the fundraising process. This service is particularly beneficial for companies that lack in-house expertise in fundraising.

‍Choosing the Right Fundraising Path

At ThatRound, we understand that every startup is unique, and so are their fundraising needs. Whether you're aiming to tap into the global reach of an online platform, the personalised support of an angel network, or the comprehensive assistance of a fundraising service, our goal is to provide the right tools and connections to help you succeed.

With our transparent, interconnected ecosystem, you can confidently navigate the fundraising landscape, knowing that you have the best possible chance of securing the capital needed to fuel your growth. By understanding these different fundraising services and their respective fee structures, you can make informed decisions that align with your startup’s goals and stage of development. Whether you're just starting out or ready to scale, ThatRound is here to guide you through every step of the fundraising journey.