Startup fundraising https://blog.wevestr.com/5-fundraising-tips-for-founders-from-friso-schmid/
Equity management https://wevestr.com/product/equity
Raising early-stage capital for a business is challenging, and even more so if you’re a person of colour. While some companies can still raise mega funds, become unicorns, and even attract capital in sectors that have been struggling, startups aren’t so lucky. Investors have many opportunities available, so it’s hard to get them to consider one seriously. And while some founders do it, they are the exceptions, and it’s not particularly fair and not rational either. The overwhelming majority of new businesses get funded via alternative sources, such as bank loans or cash injections from friends and family.
Fundraising is a crucial step for every startup; without it, you risk losing opportunities for growth. What you need is investors, such as venture capitalists or angel investors, to provide the capital to bring your business off the ground. The landscape has changed, unfortunately, which means more due diligence, less inbound interest, and fewer crossover investors. Difficult as it may be to raise capital right now, it’s not impossible to launch a viable project. If you’re ready to seek outside sources of funding for your startup and move beyond the bootstrapping stage of financing, here are some aspects to consider.
Timing Matters and It’s More Complicated Than You Might Realise
Timing is of the essence as far as startup fundraising is concerned. If you raise funds too early, you’ll end up giving away a larger share of your business than you’re willing to part with. Conversely, if you raise funds too late, you risk losing your first-move advantage, so your competitors can catch up. You can start fundraising when you have a proven solution or a prototype/minimum viable product and can’t meet your expenses any more. Bear in mind that you’re competing in an overcrowded market. Focus on the bigger picture and envision what your success will look like tomorrow. When scaling becomes imminent, it’s’ time to start fundraising.
Fundraising can help you raise money without approaching banks or institutions, yet it’s tricky to know when to start the process. Raising capital for your scaling business isn’t as simple as pitching your idea, so think carefully before you make a decision. You’re selling a stake in your business in return for a cash investment. Given that each company’s trajectory is different, there’s no one time to launch startup fundraising. You can enter a funding discussion if you can solve a big problem and are able to demonstrate demand for the solution. Optimise your methodology to reduce the time spent and increase your chances of success.
It Would Be Best If You Treated Fundraising Like a Sales Process
Fundraising is technically selling. It involves building rapport, uncovering needs, and aligning those needs with available options. Don’t fall into the trap of thinking that everyone will see your idea as the greatest innovation of modern times. If you’re an established company with market capitalisation and are willing to dilute your equity, look for VCs aligned with your market and location. You should never ask someone for money the first time you meet them. It’s necessary to build relationships. If all goes well, you’ll be connected with other projects or partnerships in the future.
If you have an “always be closing” attitude, you know just how important it is to get and stay organised no matter how hectic things can become. You’ll need to convince investors to spend more time researching your company. Since most of them don’t reach out after the first meeting, you have to make the first step. Take matters into your own hands and act before the meeting’s effect wears off. Many people can be found on Facebook, LinkedIn, or Twitter, but don’t underestimate the power of email. When you connect with investors by email, there are some mistakes you should avoid, such as lengthy introductions or complaints.
Determine If You Can Meet Investor Requests While Running the Business
Raising capital for your startup involves a rigorous process that can be draining on entrepreneurs emotionally and with regard to time and resources. Not only do you have to meet investor requests, but you also run your business effectively. It’s best to respond promptly to investors as you’ll want to convert them as quickly as possible. Investors may request information as part of their due diligence checklist for your startup, so they may ask for your business plan, financial forecasts, presentation materials, etc. You must understand that investment isn’t free money, meaning people will have certain expectations.
By putting together the disclosure documents beforehand, you can streamline the due diligence process. Prospective investors will appreciate your effort and have confidence in your company’s health. If you don’t have all the financial statements at your disposal, there’s no need to worry. Summarise your company’s financial status and offer a projection of your finances in the upcoming years. When approaching negotiations, don’t forget about equity distribution. Equity management involves deciding the degree of ownership of stakeholders, but it’s not that simple. Many firms are available locally to help you become “investor ready”, so tap into the experiences of other founders.
Closing Thoughts
All in all, starting a business can be tough, as it takes many resources to develop your offering, understand your target market, and generate consistent sales. You need money to get your business off the ground. The problem is that raising capital is hard, even for the most experienced entrepreneurs, so you’ll encounter numerous hurdles while searching for funds. It would be best to start the fundraising process sooner than you think you need to do so. You’ll get many rejections before you find the right investor(s), so don’t lose hope just yet. Remember that no two investors are the same, so do your homework before accepting an offer.
Unless you’re wealthy, you’ll need a helping hand, so approach the process with a well-thought-of plan. If all goes well, you’ll get a confidence boost. Suppose your fundraiser doesn’t live up to your expectations. Well, it’s not the end of the world; you’ll just have to try again.
