Fundraising Ideas For Startup Businesses – One of the biggest frustrations that startup founders face when raising funds is that they don’t see the expected results as quickly.
It’s understandable – all the time and effort you put into fundraising is time and effort you don’t put into developing and selling your product or service. The opportunity cost of raising funds is high.
Fundraising Ideas For Startup Businesses
Because of this, once you start doing this, it is very important to have realistic expectations and a solid plan. If you don’t, you risk wasting time, which can be fatal for early stage startups.
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So, based on our experience as founders who have been through the successful fundraising process and intermediaries between startups and startup investors, here are four steps you can take to successfully raise funds for your project.
Make sure you understand the stages of your project well because it will determine which investors will be interested in you, and what they will expect you to show them.
For example, if you don’t have a product, have you done everything you can to validate your idea? If you haven’t already, it might be a good idea to start such a venture before spending too much time raising funds. Without proof that you think there is genuine interest, you will have a hard time closing the deal.
You don’t have to do fundraising just because it’s the start. You need to be specific rather than vague about having specific goals in mind. This way investors will be able to decide whether your proposition is right for their investment profile and preferences.
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Keep in mind that the fundraising process can take six months or more (more on that below). Plan your runway accordingly!
Targeting the right customers is crucial to the success of your product. Similarly, if you target the right startup investors you will reduce the time and effort required to raise money.
If the investment profile of the fund you mentioned does not match your project (wrong industry, wrong start-up stage, etc.), then trying to convince them to invest is almost futile.
If you’re talking to startup investors who you know won’t be interested in your project, it’s best to ask them to introduce you to other potential investors in their network. Change your investment strategy. Networking and finding the right people is a productive way to invest your time and effort in fundraising. Trying to convince the wrong person is the easiest way to waste time.
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Remember that it is no coincidence that most startup funds clearly state on their websites not to call them. Startups are fundamentally about trust, and having someone vouch for your project is an important first step in building meaningful relationships. Because of this, getting people with experience in the startup landscape involved in your project in some way (eg an advisor) can pay dividends in the long run.
Innmind will help you a lot in this phase – we will constantly work to connect you with your potential investors. However, our job will be easier if you have a clear understanding of what your project offers investors. This takes us to the next step:
Understand that startup investors aren’t looking for opportunities to help startups. They are looking for an opportunity to make money.
Assuming that you have selected the most potential investors (as per step 2), what remains is to present your startup as clearly and convincingly as possible. You need to understand the “problem” of startup investors: they are looking for the best project that fits their investment profile.
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What makes your project stand out from the crowd? Your startup’s USP (things that prove you are a good investment) should be communicated immediately. Is this your team’s experience? Is it the traction and growth you want? Make sure you know where your comparative advantage lies so you can use it to make an impression from the start.
However, pitching is only the beginning of this communication process. This serves as an overview of the project. In your follow-up conversation with potential investors, it is better to customize your message to the exact investors’ needs. For example, knowing which startups have recently been invested in can give you a huge advantage in explaining why your project meets the criteria when it stands up well.
In fact, the initial fundraising process takes an average of three to six months. If you have a successful startup exit on your CV (and connections with investors in your network), the process can be very short. If this is your first rodeo, however, the six-month estimate may be shorter.
“Most people overestimate what they can do in one year and underestimate what they can do in ten years.”
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This famous Bill Gates quote applies to different time frames as well. Even though you probably won’t make much in one month, if you keep trying to find and develop investors for six, you’ll probably exceed your own expectations.
This is the main reason why VC funds don’t like cold calling. Startup investing is about trust, and trust cannot be built in a day. Successfully closing a funding round means building relationships with your investors (leads). Help them understand your project as much as possible, as well as their unique perspectives and expectations. Doing so will not only increase your chances of finding investors, but will also increase your chances of finding the right one for your project.
Because of this, it is very important to make the most of your fundraising time. Showing solid progress when talking to investors is one of the most convincing reasons for you. This shows investors that the train has moved with or not with them, which is often the final push to get you on board.
It makes it easier to convince investors that your startup is a worthwhile investment if you can rely on hard facts and real progress instead of just relying on your sales skills. Because of this, all the work you do before asking for investment and during the fundraising process makes closing compounds and funding rounds easier. Make sure to plan ahead.
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Most investors don’t like to say no and close the door – they’ll be happy to guide you.
They do this so they can return a key investor, which gives them social proof and a chance to save face if the project goes bad.
Because of this, make sure you write the expiration date on your offer. Don’t go too small – As mentioned, you can’t build the fundraising foundation you need in a month.
However, saying that your fundraising round will close on X date will help you convince your first investors to take a leap of faith.
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For example, 3 months to build your base and network is reasonable. Once you connect with at least a few potential investors, you can tell them all you can about your progress and the fact that your funding is coming. The round will end in one to three months. Finally, once the period is about to end you can make the final push – share your progress, and try to convince others to commit. Of course, this plan should be adjusted based on your runway, etc.
If you’re not successful though, it’s safe to assume that you should try to make your startup a more attractive investment. Once you’ve made changes to your roadmap or reached milestones during bootstrap, you can make another push.
In summary, follow these 5 steps to make sure you don’t start fundraising with the wrong mindset:
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