Read This Before Raising Capital for Your Startup

If you have come up with an innovative idea for your startup and are considering getting funding from investors, keep these few pointers in mind before moving ahead:

Consider an incubator program: In an incubator programme, you will be given a small sum of money to test the idea with, on a small scale. This is a good way to start, given that you get to figure out if there are any problems with the plan without risking too much money and raising the stakes. Working in an incubator will help you pivot the idea to the right direction early on and minimise strategy errors once you operate on a large scale. If you don’t mind giving up a bit of stakes to the incubation-providers, we say this is the best way to go.

Assess the valuation: For most startup founders, a common problem is reaching a consensus between a fair value of their idea and the value investors are ready to put on it. Very often founders settle for much less in their desperation to secure funding. This may enable a quick take-off but till cause problems later on. To avoid this, we recommend you test the market on a smaller scale. You can also use global averages in your industry as a benchmark and reduce it a little to be conservative and then put a valuation on your startup that is less than the average. This will secure you enough funding while the lesser value will make it look attractive to investors.

Multiple sources: Evaluate multiple sources for funding before you settle for one. It is possible that you might not find that one perfect source which puts out the perfect amount along with terms and conditions that work for you.

Be prepared to say no: In fact, the number of people you might have to refuse may actually be higher than the number of people you say yes to. Be prepared for this and assess the conditions and stake demands from each investor thoroughly before making a commitment, as this decision will be the most important one you will be taking for your startup.

Pitch methodically: In order to impress potential investors, you need to be methodical, clear and precise about your idea. As a standard, you need to have a pitch deck and a two pager. The pitch deck should summarise everything about your product, your market, your traction so far and what sets you apart.

As a startup founder, these are some of the essential points you must remember before setting out to seek capital. Go through the list and develop a strategy accordingly, and you will be soaring to great heights in no time.

No comments