While thinking about fundraising, you should encounter certain questions like:
Before that Check Out Some Important Statistics Regarding Startup Fundraising and Finance
- About 77 % of small businesses depend on individual savings for their early funds.
- The majority of startup funds i.e about 82 % came from the entrepreneur himself or herself, or from friends and family.
- 82 % of startups fail due to cash flow problems.
- About 27% of businesses weren’t able to get the funding they required.
What are the sources to get funding?
Apart from these sources, there are some professional investors and firms that look for invest in startups, mobile app ideas, small businesses, well-established firms, and organizations to get something in returns i.e ROI.
These investors are listed as Strategic Investors, Angel Investors and Venture Capitalists which are leading sources to get startup capital for businesses.
What’s the Difference between Bootstrapping, Crowd funding, Angel Investors, Strategic Investor, and Venture Capitalists?
Bootstrapping
It is an effective investment method where you can invest from your personal savings or can ask your family and friends to contribute. This is a much easy approach since there will be less formalities/compliance.
Crowd funding
It is like getting a loan, contribution, pre-order, or investments from more than one person at the same time. It is a competitive place to earn funding, so unless your business is completely rock solid, you may not find it useful.
Business Angel Investors
Business Angel Investors are successful business people or the individuals who invest their own personal funds into a potentially rewarding business opportunity. Angel investors usually do not have deep pockets thus their average investment is supposed to be smaller than that of a VC.
Venture Capitalists
Venture Capitalists are the firms or companies that invest funds gathered through others investments. Venture Capitalists invest in the business still after knowing the considerable risk associated with future cash flow and profit of the company.
Strategic investors
Strategic investors could be the customer, vendor or other business partners with whom you’re presently working and may be interested to invest in business startups. A strategic investor has deeper pockets than an angel investor, and generally has a particular reason to invest in business startups.
Check out following steps to know the exact process of fundraising ideas.
Effective Steps or Ways to Raise Funds for Business
01
Make a Business Plan
In general, your business plan should include following terms:
Business Description
Organization and Management
Funding Request
Market Analysis
Service or Product Line
Detailed financial projections
02
Develop a Prototype
You can utilize this feature as a prototype in diverse ways:
PowerPoint
Photoshop
Drawing it on a paper
Animated video
03
Analyze the Prototype from Customer Viewpoint
Throughout this analysis, you will be able to
Record the customer experience
Take a good proportionate and a representative sample
Develop a market research report
Identify the reasons why your prospective customers should use your product or services
04
Prepare a Functional Prototype
While developing a functional prototype you must consider following points:
Seek help or support from others like your friends, friends-of-friends, or anyone.
If different people could help you, then you need to protect the ‘Intellectual Property’
You could also go for the signing of a ‘Non-Disclosure Agreement’ between yourself and the developers.
05
Customer Acquisition
Follow the below-mentioned steps supporting your efforts in customer acquisition:
Use of all the available weapons to spread your business around the world as much as you can.
Send out emails from ‘Facebook to Twitter and other social media
Write blogs to newspaper articles
However, even after all this, if you fail to acquire a good number of customers, go back to the first step
'Re-evaluate, re-define, re-engineer, and re-start'
06
Monetizing Strategies
While preparing your Monetizing strategies you need to consider following points:
Identify your ‘primary, secondary, and tertiary stakeholders
It becomes essential to account stakeholders in developing Monetizing strategies
Look at different parameters and negotiate your way through various obstacles
07
Scale Your Product/Services
By this stage, you will be having answers to certain questions of investors like:
How much money do you need?
For what, where it has to be spent?
What would be the ROI of it?
However, even after all this, if you fail to acquire a good number of customers, go back to the first step
'Re-evaluate, re-define, re-engineer, and re-start'
08
Create an Elevator Pitch
For this, you need to create a straightforward presentation that will describe
Exact Purpose of Your Business
Your Identity and Requirements
Unique Selling Point
Benefits for Investors
‘Market research’ results
Highlighted numbers coming out of the ‘traction levels’, ‘market size’
Where you ‘fit’ in the market
09
Finding the ‘Money’
To find out the precise investor you can also use following approaches:
Using local ‘Angel network’
Through ‘LinkedIn’
Approaching the local ‘University incubation center’
Joining any ‘accelerator program’
‘Personal contact’
10
Delivering the pitch
While delivering the pitch you will have to consider certain points:
Try to showcase your thoroughness, sharpness, intelligence, and diligence
Prove them that you are someone they could trust.
They don’t expect you to know everything
Be clear about what you want
Be specific about what you are offering in return
Be prepared to answer any kind question
11
Refine your product
To find out the precise investor you can also use following approaches:
Carefully approach a select few target VC firms or Other Investors only one at a time
Have a business plan ready before you finish the pitch
Expect the process to take longer than you think it will
Joining any ‘accelerator program’
‘Personal contact’
No doubt you are about to initiate your business thus you will require the finance at the beginning stage. Still, you need to be aware of some other funding types that will be helpful at later stages of your business.
What are the Funding Types?
Investing at the initial stage of your business referred as series A funding.
Followed by this funding there is a Series B, C, and D round that tends to invest in middle or later stages of business.
Further, The Funding Concept Is Broadly Classified As:
Seed Capital for Startups
The capital invested by your VCs or business angels in this type could be used to produce a sample product and fund market research. You would be seeking a seed capital for start-ups if you’re just beginning and have no product or organized company yet.
Startup capital for Small Business
The funding got at this stage could be used for additional market research, the product or service finalization for an opening to the marketplace, and further recruitment of other key management.
Early Stage Capital Funding
After a complete and well settlement of your business, if you are looking for new opportunities to improve company’s efficiency and productivity then VC funding could help you at this stage.
Expansion capital Funding
Investment at this stage might help you to increase your marketing efforts and enter new markets and you must look out VCs that specialize in investing at this stage.
Late Stage Capital Funding
When you are ready for the second level of management, after achieving impressive sales and revenue you will need this level funding.
Since you are about to begin working out your business idea, first two-stage funding are the most preferable for you.
There are certain tricks, methods and strategies to precede your startup towards a success and to sustain it. And this is the next step you have to go through. To help you out in this trouble, we will be back with our next blog “How to Make Your Startup Survive in the Competition”.
