Securing funds is one of the most crucial things for start-up entrepreneurs and founders, especially in the early stages. Funding would help companies hire more employees, develop the product and position their companies on a new growth trajectory. Fundraising is not for the faint of heart as it can be a grueling, exhausting endeavor for many. Whether you are looking for dilutive or non-dilutive capital, there are many options to fundraise which entrepreneurs should be aware of before starting. For example, you could consider going for grants, joining an accelerator, reaching out to angel investors, or getting a loan from a bank. Crowdfunding is another way to raise funds in entrepreneurs can provide a detailed description of their business, the amount of money needed, and for what reasons so that interested parties can make their pledges online.
Whichever funding method you decide to pursue, ensure it aligns with your vision, mission, and long-term growth for your start-up. Here are four things that could help start-up entrepreneurs decide which funding mechanism is the most appropriate one for them.
1. Start With the Basics
First, choose whether you’d like to go for dilutive or non-dilutive funds. Dilutive funds refer to securing funding that requires you to give up a portion of the company. This is typically true when you secure funding from Angels Investors or Venture Capitalists. On the other hand, non-dilutive funds do not require you to offer a part of your equity to the funding companies. Examples of non-dilutive funds include grants and start-up awards. To know which method to pursue, make sure to devise a plan on what you need the funds for along with a strategy of how this funding would bring your company and your technology to a whole new playing field.
2. It Gets Hard Sometimes
Securing funds is HARD. This is especially true for first-time founders because your company has no proven track record and some investors can be skeptical. Luckily, the more you keep hunting, the easier it gets. Despite the amount of “no’s” you will get along the way, the more conversations (and rejections) you will receive, the more you will learn as to what investors are looking for in terms of an investable business model. Take this feedback to improve your pitch and business plan. Eventually, someone will notice your progress and be ready to invest money in your company. Remember, the hardest investor to win over is your first investor – all you need to find is your first “yes.”
3. Listen to the Feedback
Very likely, you will receive positive and (especially) negative critiques along your fundraising journey. Don’t take rejections or negative critiques from investors personally! Instead, ask for their feedback as to why they chose not to invest and learn from them. Although this can be difficult, learning from such feedback would help boost your knowledge and even improve your chances of funding from the next investor.
4. Be Prepared - Have All Documents & Materials Ready to Go
There is power in being prepared before your investor meetings. Have the pitch deck, business plan, prototypes, or anything else ready to go that can inform investors more about your business opportunity, giving you a competitive edge. Your business plan should include a company description, your business structure, the innovation and its competitive advantage, and your financial projections. Have a prototype ready to go to show investors you have been working hard on an idea. As you become more prepared before arriving at an investor meeting, this would better your chances of securing funds.
Fundraising is one of the hardest things for a start-up, which takes a lot of time, effort, and patience. Sometimes, you might feel like giving up along the way due to the many obstacles you face. However, it is important to persevere your time and energy throughout your fundraising journey by having a plan in place before reaching out to investors. Learning to fundraise is a skill that can take years to master. Don’t be hard on yourself if you cannot secure funds the first time!
Get a copy of Train Like a Scientist, Think Like an Entrepreneur (available on Amazon today) to learn more about different fundraising options for your start-up.