6 Rules of Startup Funding

Posted by Ilayda Taze on Jul 12, 2021 08:08: AM
Ilayda Taze

Raising funds for a startup is one of the most challenging tasks a founder has to do. You need to consider several things to make your business successful. And if you're new to the business environment and are still inexperienced, it can make it harder than it already is.

But don't fret. 

This article will explain the six rules you need to know for your startup funding.

Rules of Startup Funding:

1. Network

Networking allows you to become more involved in your community and industry, raise your profile, and draw attention to your startup.

People prefer to do business with people they know or are familiar with, and through networking, you may increase the chances that people will want to do business with you.

Begin developing connections with people who have influence and reach out to other businesses and investment networks.

Talk to them, learn from them, and get some general feedback. If you're lucky (and prepared), the facts you present and the questions you ask may pique investors' interest in your company.

Also, networking allows you to meet other small business owners who can act as mentors and moral support throughout the starting phase.

Even if you have employees or supportive family members on your side, starting a business is a lonely endeavour. Knowing other entrepreneurs who have been "in the trenches" and understanding what you're going through will help you get through the difficult times.

2. Growth is essential, but profitability matters no less

When it comes to business success, profitability and growth go hand in hand. 

Profit is essential for a company's primary financial survival, whereas growth is essential for profit and long-term success. Investors should consider each factor concerning a specific company.

Profit is the primary goal of any company, and profit may be the only capital available to a company without investors or finance.

A company's survival and operation will be jeopardised if it lacks sufficient cash or financial resources. 

Profitability is crucial for a small business since it affects whether it can acquire bank financing, attract investors to support operations, and expand its operations. Companies that don't make a profit are doomed to fail.

3. Show off your team

When you approach investors, you're not just selling them on your product or service; you're also showing them your team. 

As your team is one of your company's most important assets, you want to make sure your investors see them as such. You want to make sure that your investors consider your staff as one of your company's most valuable assets. 

Make every effort to treat each employee with respect. Also, emphasise any aspect of their professional profile relevant to your startup's direction.

Ensure the investors are aware of the people of your team, their efforts, and their abilities. Please don't believe that a one-person show is a way to go because it will appear unrealistic to many investors.

If possible, bring a few influential members of your team along in the pitch meeting. Just make sure that everyone is assigned a task. You can divide the presentation into sections so that everyone on your team has a chance to shine and demonstrate to your VCs that you've assembled the most outstanding team possible.

4. Seek out investors who provide more than a check

Money is nice but search for an investor who wants to collaborate with you rather than throw money your way. 

An injection of cash in your startup is excellent (and, frankly, it's what you're looking for in the first place), but seek investors that can truly bring value to your company beyond money. Working with a seasoned investor can provide you with a wealth of information and abilities.

An investor who can assist you in growing your startup, whether through advice or industry connections and knowledge, will be more valuable to you in the long run than one who can only offer money. They will frequently reveal their failures and hard times, and you can learn from this to improve your entrepreneurial journey.

5. Highlight the gains

Make it clear to investors what they will gain from working with you. That's the bottom line that matters to investors. Make sure to let them know how your business concept benefits them.

You must demonstrate how your product or solution is better than the existing quality, speed, or cost alternatives. It would help if you quantified the customer value proposition, demonstrated that the product or solution is better, or present evidence that such aspects are essential to the consumer.

6. Show results

Investors are looking for more than just your idea. 

They want to know if your concept is viable. It can be pretty tough to build a customer base (even a tiny one) without any money. Still, it would be best if you did everything possible to gain a customer to demonstrate that you are interested in selling. Think outside the box for strategies to attract your initial clients without spending much money you don't have right now. Demonstrate a passion for the industry, and the investor will believe you're more committed to the company's success.

Summary

There are many rules you'll hear when it comes to startup funding. It's a challenging path to take, but it's well worth the effort.

Keeping these rules in mind can help you seek funding and help you obtain the resources you need to grow your startup much more effortlessly.

However, if you still have any questions regarding your startup, we are very much willing to help you. Contact us by scheduling an appointment with us today. Rest assured that someone will get in touch with you to answer all your questions.