Financial Intelligence

Important Things To Note When Raising Funds For Your Startup

An entrepreneur is an ideal combination of a dreamer, a scientist, and a manager. While setting up and running new business ventures, entrepreneurs don many hats and play many roles to manifest their dreams.

One of the most important aspects of launching a startup is raising funds. In most cases, new entrepreneurs lack the financial resources required to start a new business. This is what pushes them to raise funds from external sources. Whether you want to raise funds via crowdfunding, angel investors, venture capitalists, or any other source, it is important to do it right. Securing financing for your business is an important benchmark for your startup and determines the journey of your business as it enters the market.

Statistics show that around 58% of startups have less than $25,000 with them during their initial phase. This makes young entrepreneurs seek financial help from sources that best suit their needs. By reaching out to the right investors, startups get valuable advice along with financial aid.

If you are struggling with finances and are thinking about raising funds for your dream venture, here are some important tips to keep in mind:

1. Give The Utmost Importance To Your Business Model

Many budding entrepreneurs get so carried away by their dreams that they lose sight of the ground while pitching to investors. While having a strong vision and a powerful dream is always an added advantage, remember that investors are more interested in their returns than your dreams!

Make sure you give the utmost importance to your business model to make a successful pitch and raise the required funds for your startup. Almost every aspect of your pitch and initial discussions with investors would center on the viability of your business model.

Always make sure that your business model provides a clear idea of your business goals and the ways in which you would achieve them. Focus on the revenue models to be used and how you plan on expanding your venture in the years to come. In short, your business model should be able to convince investors how you will help them make money.

2. Know Your Target Audience Well

You can never impress and convince investors if you possess half-baked knowledge about your target audience. Because your business will primarily revolve around meeting the needs of your customers, it is critical that you thoroughly understand your target audience as you raise funds for your new venture.

Investors are likely to ask you a lot of questions about the customers you are targeting and how you plan to fulfil their requirements. Make sure you spend enough time researching your target audience and their choices before you look for financing.

3. Focus On Providing A Solution

Investors we have worked with over the years prefer funding startups that are inclined towards resolving specific issues. Before you raise funds for your new business, make sure that your initiative provides a solution to a problem that matters. Many new entrepreneurs make the mistake of trying to find a solution to a problem instead of going the other way! Look for a problem faced by your target audience, understand what the best way to resolve it is, and incorporate the same into your business model.

Providing the right solution to the right problem would automatically increase the utility and value of your business and help you convince investors effectively.

However, this does not mean that you are required to cater to the lowest denominators in society. Even if you are entering a target market, always come up with a solution to a problem faced by your target audience.

4. Show The Willingness To Improve

No human being is 100% perfect and efficient. We all have a set of strengths, drawbacks, and weaknesses. The same is true for your business. While it is very important to be confident about your new business, it is equally important to show your investors that you are willing to improve and learn.

Every budding entrepreneur has their own fears, apprehensions, and weaknesses. These are the areas where they need to improve. As you prepare your investor pitch to raise funds for your business, do not shy away from acknowledging the areas your business needs to improve and how you plan to overcome the hurdles over time. This would give a more realistic picture of your business in the minds of potential investors.

However, talking about the areas you still have to improve in does not mean downplaying your potential. Even while you are talking about the scope for improvement, be confident in your approach and make the investors believe that your business will show signs of improvement over time.

5. Have A Well-documented History Of Your Business

From the day you laid the foundation of your business, it is very pertinent that you keep a detailed record of all the details about your startup and provide the same to the investors as you attempt to raise funds. Right from financial records to the very nitty-gritty details of your business, keep all possible records handy to gain investors’ confidence.

Every investor wants to put their money in a business that is a real one. They would always want to know about the history of your business and understand where you are coming from.

6. Do Not Be Afraid to Request Help and Assistance

Take the first step towards raising funds for your business only when you are confident about the assistance you are seeking. Once you have ventured into the field, do not hesitate to ask for help from your investors. Be upfront and transparent about the funds you need and how you will put them to use.

A lot of new startups make the mistake of underselling themselves and their products because of unwanted hesitation. Even if you are bootstrapping and are looking for funds from your friends or family members, do not hesitate to ask. You may be shocked to know how willing your loved ones are to help you out on your journey as an entrepreneur!

7. Be Receptive

While you seek financial help from investors, never make the mistake of being a “know-it-all” in front of them. Investors across the board are willing to work with entrepreneurs who are humble enough to listen to them and value their input.

Regardless of how skilled and capable you are, remember that the investors are more experienced than you and that you will require their assistance throughout your journey. Being receptive allows investors to guide you in your venture and mold you into a successful entrepreneur. If you are rigid and arrogant while approaching potential investors, the chances of rejection will always be high, despite the potential in your business.

Never Lose The Touch Of Creativity

Launching a startup is no less than a coveted art form, much more than a science form. We live in an age where competition is intense across all major industries. Unless you come up with a product or service that has never been heard of before and is a unique one, there are high chances of you facing competition from peers dealing in similar offerings.

In cases like that, it is important to win over your investors by being creative. Do away with the first thoughts and think outside the box while making your pitch. Even if your product or service already exists in the market, position your brand in a way that really makes you stand out from the clutter. Be quirky in your approach and manage to grab the attention of investors from the get-go. Even if an investor is not ready to fund you at the moment, a creative approach would make them remember your brand for a long time.

Every Negative Response Is Market feedback.

As you proceed in your journey to raise funds for your startup, you are likely to face many rejections before you close the right deal. Rather than getting demotivated and disheartened, always consider a rejection to be market feedback. Every time an investor(VC, angel investor, debt ventures) refuses to provide you with financial aid, critically analyze what made them back out and what changes and adjustments you need to make to your pitch or startup. Your startup will keep getting stronger over time when you convert every rejection into an opportunity to improve your venture.

The Final Word

These are some of the most important tips to have in mind before you hit the ground running to start raising funds for your startup. Irrespective of the industry sector you are in and your scale of operation, do your best to make a pitch that is inclined towards making all parties happy with your new venture.

Silas Ugochi

Silas Ugochi is a Staff Writer and Content Creator at GetFundedAfrica. Ugochi is an educated content writer who relishes using her skills to help GetFundedAfrica's Media Team achieve the goal of sharing the success stories of African entrepreneurs. When she isn't writing articles, she can be found listening to music, reading, or DJing.

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