Important Tips To Consider Before Raising Funds For Your Startup

An entrepreneur is an ideal combination of a dreamer, a scientist, and a manager. While setting up and running new business ventures, entrepreneurs don many hats and play many roles to manifest their dreams.

One of the most important aspects of launching a startup is raising funds. In most cases, new entrepreneurs lack the financial resources required to start a new business. This is what pushes them to raise funds from external sources. Whether you want to raise funds via crowdfunding, angel investors, venture capitalists, or any other source, it is important to do it right. Securing finances for your business is an important benchmark for your startup and determines the journey of your business as it enters the market.

Statistics show that around 58% of startups have less than $25,000 with them during their initial phase. This makes young entrepreneurs seek financial help from sources that best suit their needs. On reaching out to the right investors, startups get valuable advice along with financial aid.

If you are struggling with finances and are thinking about raising funds for your dream venture, here are some important tips to keep in mind:

Give The Utmost Importance To Your Business Model

Many budding entrepreneurs get so carried away by their dreams that they lose sight of the ground while pitching to investors. While having a strong vision and a powerful dream is always an added advantage, remember that investors are more interested in their returns than your dreams!

To make a successful pitch and raise the required funds for your startup, make sure you give the utmost importance to your business model. Almost every aspect of your pitch and initial conversations with the investors would revolve around the viability of your business model.

Always make sure that your business model provides a clear idea about your business goals and the ways in which you would achieve them. Focus on the revenue models to be used and how you plan on expanding your venture in the years to come. In short, your business model should be able to convince the investors how you will help them make money.

Know Your Target Audience Well

You can never impress investors if you possess half-baked knowledge about your target audience. As your business would essentially revolve around catering to the needs of your customers, it is important to know your target audience well as you raise funds for your new business.

Investors are likely to ask you a lot of questions about the customers you are targeting and how you plan to fulfil their requirements. Make sure you spend enough time researching your target audience and their preferences before you look for finances.

Focus On Providing A Solution

Investors around the world prefer funding startups that are inclined towards resolving specific issues. Before you raise funds for your new business, make sure that your initiative provides a solution to a problem that matters. Many new entrepreneurs make the mistake of finding a solution to a problem instead of going the other way! Look for a problem faced by your target audience, understand what is the best way to resolve it, and incorporate the same in your business model.

Providing the right solution to the right problem would automatically increase the utility of your business and help you convince the investors effectively.

However, this does not mean that you are required to cater to the lowest denominators in society. Even if you are entering a niche market, always come up with a solution to a problem faced by your target audience.

Show The Willingness To Improve

No human being is 100% perfect and efficient. We all have a set of strengths and drawbacks. The same is true for your business. While it is very important to be confident about your new business, it is equally important to show your investors that you are willing to improve.

Every budding entrepreneur has their own fears, apprehensions, and weaknesses. These are the areas where they need to improve. As you prepare your investor pitch to raise funds for your business, do not shy away from acknowledging the areas your business needs to improve and how you plan to overcome the hurdles over time. This would paint a more realistic picture of your business in the minds of potential investors.

However, talking about the areas to improve in does not mean downplaying your potential. Even while you are talking about the scope for improvement, be confident in your approach and make the investors believe that your business will show signs of improvement over time.

Have A Well-documented History Of Your Business

From the day you laid the foundation of your business, keep a detailed record of all details about your startup and provide the same to the investors as you attempt to raise funds. Right from financial records to the nitty-gritty details about your business, keep all possible records handy to gain investors’ confidence.

Every investor wants to put their money in a venture that is a real business. They would always want to know about the history of your business and understand where you are coming from.

Do Not Hesitate In Asking For Help

Take the first step towards raising funds for your business only once you are confident about the assistance you are seeking. Once you have ventured into the field, do not hesitate in asking for help from your investors. Be upfront about the funds you need and how you would put them to use.

A lot of new entrepreneurs make the mistake of underselling themselves and their startups because of unwanted hesitation. Even if you are bootstrapping and are looking for funds from your friends or family members, do not hesitate in asking. You may be shocked to know how willing your loved ones are to help you out on your journey as an entrepreneur!

Be Receptive

While you seek financial help from investors, never make the mistake of being a ‘know-it-all’ in front of them. Investors across the board are willing to work with entrepreneurs who are humble enough to listen to them and value their inputs.

Irrespective of how skilled and capable you are, always acknowledge the fact that the investors are more experienced than you and you would need their assistance throughout your journey. Being receptive allows investors to guide you in your venture and mould you into a successful entrepreneur. If you are rigid and arrogant while approaching potential investors, the chances of rejection will always be high despite the potential in your business.

Never Lose The Touch Of Creativity

Launching a startup is no less than a coveted art form. We live in an age where competition is intense across all major industries. Unless you come up with a product or service that has never been heard of before, there are high chances of you facing competition from peers dealing in similar offerings.

In such cases, it is important to win over your investors by being creative. Get rid of the first thoughts and think out of the box while making your pitch. Even if your product/service already exists in the market, position your brand in a way that makes you stand out from the clutter. Be quirky in your approach and manage to grab the attention of investors from the get-go. Even if an investor is not ready to fund you at the moment, a creative approach would make them remember your brand for a long time.

Acquire Funding At An Earlier Stage

Many startups make the mistake of waiting for their business to have a good run in the market before approaching investors for raising money. This is often because entrepreneurs are not willing to have third-party shareholders on board.

However, it is advisable to secure funding for your business at an earlier stage to make the most of the financial assistance. Ideally, a new business may take a few years to reach decent profitability. Instead of creating a pile of debts before you start making profits, finding investors would help you finance your losses effectively.

Moreover, taking financial help from investors at an early stage would provide you with expert guidance for entering the market and building your brand the right way.

Every Rejection Is Market Feedback

In your journey of raising funds for your business, you are likely to face many rejections before you close the right deal. Instead of getting demotivated and disheartened, always consider a rejection to be market feedback. Every time an investor refuses to provide you with financial aid, analyse what made them back out and what changes you need to make to your pitch or startup. When you convert every rejection into an opportunity to improve your venture, your startup would keep getting stronger over time.

The Final Word

These were some of the most important tips to keep in mind before you hit the ground running and start raising funds for your startup. Irrespective of the industry you belong to and the scale at which you operate, do your best to make a pitch that is inclined towards making all parties happy with your new venture.