Starting a business comes with a range of challenges and obstacles and it can be overwhelming to know where to begin. Here we share our 4 top tips on how to get started when seeking startup funding.
1. Have a clear business plan
The best starting point for any entrepreneur seeking funding is to be 100% clear on their business idea and know the direction in which they are headed. It is not enough just to pitch a compelling idea – investors will want to know that a business idea has real life potential and return on investment so you will need to be able to justify how your business is going to make money. Subsequently, you will need to show a step by step plan explaining why your company is profitable and when investors might be able to see some of that investment.
When presenting your idea to investors, the best thing you can do is support your business plan with well-thought through calculations and detailed information about the financials of your business. You should present both the actual figures and the forecasted figures and be able to justify your predictions. All of this information will help build trust and confidence with any potential investors.
As soon as you launch your business, it is crucial that you are tracking and recording all metrics, finances, cash flow. The more financial history you are able to show investors, the more you are demonstrating the legitimacy of your business. Even if you have lost money in the past, investors will want to see an accurate picture of your business: the past, the present and the future.
2. Know why you are seeking funding and be transparent
Before seeking investment, you should be able to explain what the funds will be used for. Investors will want to know where their money is going so you need to be ready to justify the exact purpose of the investment. The more detailed you can be, the better so financial experts recommend putting together a price breakdown of your funding request.
At this stage, it is important to be as transparent as possible as it will serve you in better stead in the long run; lying to your investors will only get you in trouble in the future. Do not be scared to identify any potential risks or problems; however, come prepared with a solution about how you will overcome these problems. Investors will appreciate that you are preempting any problems and already assessing how to combat them.
3. Approach the right people at the right time
At each stage of your startup’s progress, you need to know exactly where the money will be coming from. Research is crucial knowing who you are approaching, at what stage, and what you are asking because at different stages of the company there will be different needs and priorities. For example, in the early stages, you might want to consider personal savings, your personal network, cash advances for your business or small loans. Approaching larger investors prematurely could end badly and you could burn the contact for the future.
Do your research thoroughly and know exactly who you are reaching out to. Not only will this help you decide if they are right for your business, it also enables you to network meaningfully. Look into their previous investments including sectors and areas they have shown a preference for.
There is a lot to be said for meaningful networking – meeting investors organically rather than cold contact via LinkedIn or email. Look out for networking opportunities where you might be able to meet the right people organically. In this environment, investors may be more open to hearing your pitch, especially if you have done your research correctly and can connect with them meaningfully.
4. Tailor your pitch
Before any pitches, try and find out who you will be pitching to and and do your research. The more you know about these people, the better, and you can adapt your pitch accordingly. Investors will respond better to a personsalised approach and it will make them more emotionally invested in your pitch.
Clear, confident and engaging pitches that capture the attention of investors will always be better than those which express uncertainty or doubt. Try and stand out from the crowd as investors are likely to see hundreds of pitches every year. A clear business plan with compelling numbers will only go so far; make sure you are telling the story in a way that is attention-grabbing, personalised and memorable.
