Raising funding for a startup requires persistence, determination, and a clear understanding of your business model and goals. There are three factors that can affect the type of funding options a Startup may decide to pursue and the chances of success. They include;
- Growth Stage of the Startup
- Industry of Operation
- Amount intended to be raised
While these factors shape the funding options a Startup may pursue, several considerations are important to consider when raising funds for your startup.
Build a Solid Team
Before approaching an investor or even considering fundraising, look at your team and ask yourself, “if I were an investor, would I invest in this team?” The composition of a team is essential and strategic when pitching your innovative ideas to investors. Most investors will be interested in the people behind the product or service because these are the people that will either lead the startup to success or failure. Building a solid team can be the deciding factor when negotiating with investors.
Pitch Deck
A Pitch Deck presentation helps potential investors learn more about your business. A good pitch deck will contain information about who you are, what problem you are solving, the solution you have developed for that problem, team composition, competitors, and most importantly, how you intend to drive sales and make returns for the investor.
An effective Pitch Deck must be informative, differentiate you from the competition, and provide enough information to enable investors to understand your product or service and help them make an informed decision.
Understand Your Finances
Financial know-how is vital to raising funds for your startup. Keep meticulous financial records and exercise financial responsibility to show investors your business is a viable investment opportunity. As a founder without an accounting or finance background, it is good to have someone on the team, either as an employee, consultant, or advisor who has knowledge in this area and understands your startup’s industry.
Leverage Your Network
Networking and building a community that you can rely on for mentorship, advice, peer review, etc., is important when considering raising funds for your startup can drive awareness. Connect and leverage your relations with your industry’s investors, entrepreneurs, and business leaders. Attend networking events, join industry organizations, and seek out mentorship opportunities. All these interactions keep you top of mind with a potential investor and a step ahead. A product or service an investor has heard of before a pitch or introduction is likely to yield better output.
Explore Partnerships
For early-stage startups looking to gain traction and push awareness about a product or service offering, you can explore and leverage partnerships. Another way to go is to collaborate with another company or a strategic partnership with businesses with an established audience who fall within the same bracket as your target audience. For instance, many Nigerians enjoy coupling carbonated drinks with biscuits. If you are new to the market, as a biscuit manufacturing company, a partnership with a known brand that manufactures carbonated drinks will give you the visibility you need, which can promote credibility and can be a reference point when pitching to investors.
Use Cases
Examining how similar startups in your industry of operation navigated and achieved fundraising success is essential when preparing to raise funds. It is essential to study and understand the highs and lows of the business and prepare in advance for similar challenges.
Overview of Funding Options for Startups
There are several funding options available to startups. The best funding option for a startup may differ from one startup to another.
Traditional Funding Options include:
- Bootstrapping
- Crowdfunding
- Angel Investment
- VC Funding
- Incubators/Accelerators
Non Traditional Funding Options include:
- Bank Loans
- Government Grants
- Winning a competition
It is important to remember that all Startups are different. One funding option may be best suited for a Startup, while another may opt for a combination of two or more funding options available. Another perspective to explore is to examine successful Startups that provide a similar product or service to yours or even just operating in your industry and decipher how they got funding.