Fundraising is difficult for most businesses regardless of when they are seeking capital, but it can be particularly tricky for startups to raise money during the early stages. There are various barriers to entry that can make the startup process downright overwhelming, including an increasingly competitive marketplace, savvy and scrupulous investors, and constantly changing business dynamics. Nonetheless, here are six steps that startups seeking early-stage funding can take to distinguish themselves from other contenders and garner more dollars.
1. Create the Right Team with the Right Qualification
Clearly, startups do not have a record of sales or historical analyses to offer prospective investors. As a result, one aspect that investors will heavily scrutinize is the leadership team heading up the proposed venture. In the early phase of a business, prospective investors are essentially betting on the skills and experience of the startup founders, so putting together the right team with the right qualifications is vital. The stronger the team is as a whole, the more likely the investors will see the company’s potential.
2. Formulate the Company’s Vision and Trajectory
Creating a solid team with diverse expertise is extremely important, but the members of that team should also share a common vision. Investors want to see a team that is passionate about the company and its vision and committed to doing whatever it takes to steer it in the right direction. By elucidating a clear vision and formulating specific goals, investors will have more confidence in a company’s future.
3. Assess the Competition and Determine the Company’s Unique Edge
Many people start businesses because they believe that they can provide a better version of an existing good or service. In other cases, companies are seeking to fill a gap. Regardless of which scenario applies, it is imperative for a startup to evaluate the competitive landscape, identify potential competitors, and determine its unique edge. Distinguishing characteristics and an innovative approach serve as excellent pitch points, and investors are more likely to commit funds to companies that exhibit creativity and a competitive edge.
4. Establish a Profitable Business Model
Corporate social responsibility is an important component of establishing and running businesses, and some investors will be attracted to businesses that provide a much-needed service to the community or commit company resources to such endeavors. Nonetheless, the decision to invest in a particular business is predominantly related to the likelihood of receiving a substantial return on the investment. Thus, startups must establish a business model that will generate a profit and lead to growth, thereby attracting early-stage funding.
5. Implement a Strategy that is Distinctive Yet Pragmatic
Establishing goals for the company is important, and having a clear, written strategy to attain those goals is even more important. Investors do not just want to hear about lofty goals and expectations. Rather, they want to know exactly how a company intends to achieve them. And, the strategy cannot be some generic, cookie cutter plan. Companies must write out a business plan and strategy that shows a company’s distinctive objectives and methods of achieving them, as well as a concrete time line, individual responsibilities, and any other relevant information that will intrigue investors. In addition to displaying creativity, the strategy must be realistic and attainable.
6. Craft a Message that Fosters Investors’ Interest
Companies may go about the fundraising process in different ways, but it is wise to put together some sort of presentation to provide to investors. This can be done via the creation of a website, uploading documents and financial information to a virtual data room, or even printing a portfolio. The overall goal should be to explain the company’s mission, provide biographies of the leadership team, and outline what investors can expect to gain from funding the venture. The manner in which this message is conveyed is just as important as the content of the message, so focusing on crafting a message that piques investors’ interest is crucial.