For a good and successful startup, there are two important things. First a good idea or a plan that will bring some technological advances that can benefit people. The concept of your startup should be innovative and creative enough so that investors are ready to put their money into the project.
And the second essential thing for a startup to be successful is the investment itself. You should always try and acquire funds in a way that they meet both your present and future needs. Your present needs being capital requirements like infrastructure, equipment, etc. And your long-term funds include administrative expenses, working capital requirements among others.
The first step of setting up a startup that is the idea or concept that you want to work on. The good thing about this is that you have complete control over this aspect. You have the freedom to pick any field, any level, any idea that you want to do more research in and create advance level developments.
Here’s the tricky part in establishing your startup, collecting funds, that is, getting good investors that will provide adequate funds for your project. You should have investors that are not looking for a quick profit or hoping to get back their investment in a short period like a year or two.
But instead, the investor’s goal should be focusing on developing the best possible technology that is cutthroat and innovative. They should be able to support your project no matter how long it takes you to reach that stage. The main focus should always be on Quality and not quantity.
Funding Options For Startups
We are sure that by now you must have understood the importance of good investment funds for your startup. You can choose from a variety of funding options depending on your startup’s concept needs. We are going to break down for you some main funding options for startups.
This is a perfect choice for you if you want to raise a small capital for a relatively short period. Angel investors don’t interfere with your day to day operations and are very passive when it comes to their approach to getting back their returns.
Venture Capital Investors
It’s the best option for people that lack experience in the business. As venture capital investors are primarily in the business of financing startups they can easily provide you with any assistance related to marketing or other aspects.
This alternative of startup investment can be described as a hybrid of angel investing and venture capital. The funds obtained from family offices are lesser than venture capitalizing. Family offices are more mission-driven and industry-focused than angel investors.
Now that you know the basics of different types of investments available for your startups, we are going to focus on things you should do if you are looking for funding for your startups.
Five Thumb Rule For Raising Funds For Startup
These are our five thumb rules that you should follow when you are raising funds for your startup:
1. Build a Relationship
Before you start about launching your startup or even before you start to look for potential investors, it’s important that you start socializing and making contacts within the industry. Having friends and acquaintances in the market will increase the chances of scoring a good investor for your startup. Your contacts can help you build a good reputation among investors thereby there are higher chances that you will get the amounts that you are hoping to raise with minimum conditions and interferences from the investors.
2. Pour passion into your every pitch
It’s a known fact about startups that 99.9 percent of the time you need to approach more than one investor to raise the funds for your project. But it is possible that after the first few pitches to the investors you may start to feel disheartened and demotivated. We highly suggest that you try not to give in to those negative feelings and maintain the same passion and energy that you had in your every first pitch meeting. Every investor should be able to see your passion and commitment to the project, no matter if he’s your first pitch or the last.
3. Contact multiple investors
We know that it is not easy to secure a reliable and generous investor for your startup. So that is why we suggest that you don’t just depend on a selected investor and try to pitch your idea to multiple investors. Doing this has two advantages. First, you always have a backup plan in case things don’t go as planned with your first investor. And secondly, you can also get more funds from a different investor that may see more potential in your startup than what others may fail to see.
4. Choose something new and exciting
When choosing a topic/idea for your startup choose something new and innovative and has a lot of potential in the future. You are more likely to get funds for your startup easily if your idea has less competition. When you pick a topic that everyone is already working on then you may have to do some serious grooving to secure the funds for your startup. On the other hand, if your idea is innovative and groundbreaking you might be in a position where multiple parties may want to invest money in your startup.
5. Prepare a foolproof plan
Before you start approaching investors for funds, draft a complete plan for your startup. Include all the details when can the startup start generating revenue, expected revenues, incomes, all the list of expenses, and every known risk that can be expected in the future. Investors don’t like risk, but more than that they don’t like unexpected surprises. So even if your venture has some aspects that may bear some loss in the future, it is better to disclose it now in your business plan. This makes the investor more likely to trust you as you are being honest with them.
So whether you are a startup that is currently looking for investments or just individual planning on exploring the innovative ideas inside your brain, we are sure that our tips will help you achieve success faster.
Always remember that you may not succeed in the first attempt or pitch, but the important thing is to keep trying. Some people find the right investors for their startup easily and some have to wait for a long time but don’t lose hope. There is a market for everything; you must find the right investors that are willing to give you enough funds so you can pursue your idea.
We hope that our guide helps you decide the right investors to fund your startup. Always be honest about what your plans for the startup are and never try to hide or gloss over things to make your pitch more profitable. And ultimately, you will find an investor that wants to invest money into your startup.
We wish you the best.