Fundraising for a startup is one of the most important processes that help bring your idea into life. Regardless of the reason, whether it’s to develop a product, market it, or to expand operations, being aware of the process can go a long way in helping you get the funding. Below is a breakdown of the major processes that will help you in the process of sourcing for capital for your startup.
1. Develop a Solid Business Plan
To introduce a business idea to potential investors, a full-fledged business plan has to be developed. This document should include your business strategy, your target consumers, your competition, your revenue generation plan, and your marketing plan. Writing out a clear business plan shows that you know the market and how you plan on conquering it. It is your business plan that charts your course for your startup and also a tool for convincing investors.
2. Identify Your Funding Needs
Define your requirements of financial resources and how you intend to utilize them. Deduce your funding needs into various sectors, including the product, promotion, employees, and miscellaneous. It will assist you in expressing your needs clearly to the prospective investors and show that you know how you will be utilizing their money.
3. Explore Different Funding Sources
Exist various types of funding that can be used to finance startups, which has its strengths and weaknesses. Consider the following options:
Bootstrapping: Found your startup with your personal money or with the profits from the first few sales. This approach helps a person to have complete control over the business but the growth aspect may be restricted.
Friends and Family: Friends and family funding can be a wonderful method for getting capital to get started. But it is necessary to be cautious with this option as it may negatively influence the personal relationships if the business does not bring the desired results.
Angel Investors: These are people who use their own money to fund new ventures in return for shares. They not only give money, but also guidance and contacts with people in the field.
Venture Capital: Venture capitalist companies provide capital to new businesses that have the potential for high growth in return for shares. This option is ideal for businesses that are in dire need of a lot of capital and are willing to compromise on some management privileges.
Crowdfunding: The likes of Kickstarter and Indiegogo enables you to source small amounts of money from the larger population. This method can also prove your product idea to the market, thus acting as a marketing tool.
4. Develop a captivating pitch slide deck
A pitch deck is a set of slides that can illustrate your business idea and funding requirements. It should contain your selling proposition, target market, value creation strategy, competition and performance forecast. Do not make the presentation long and boring, but try to bring out the most important aspects of your startup. Remember to always adapt your presentation to the audience by appealing to their needs.
5. Network and Build Relationships
Networking is critical when sourcing for capital. Go to the events in the industry, startup meetings, and pitching events to find the investors and like-minded people. Developing relationships can help in getting good referrals and leads. It is perfectly acceptable to use such social media as LinkedIn to directly connect with investors and other professionals.
6. Get ready for due diligence
Once the investors are interested in your company they will investigate to determine if it is worthy of investment. Expect to share your financials, legal papers, and information about the team and business in general. Integrity while going through this process can help in gaining the trust of the investors and thus increase your chances of getting the funding.
Conclusion
Starting a business entails the process of sourcing for funds, establishing networks, and marketing the business. Therefore, it is crucial to elaborate on the business plan, determine the necessary funding, consider the potential sources of funding, create an effective presentation, network, and be ready for due diligence to increase the likelihood of obtaining the required amount of funding for the development of the startup. If you are determined and approach it right, then your dream can become a successful business.