The 3 Key Factors To Keep in Mind When Fighting for Startup Funds
So, you’ve decided to follow your dreams and achieve your entrepreneurial aspirations. Good for you! But like all potential startup executives, you need funding unless you are very fortunate or already have a nest egg set aside for your new business.
If you’re like most of us, you’ll need to fight tooth and nail for startup funds. The industry is quite saturated regardless of your niche or focus. And you’ll have to compete against other startup owners and ideation masters for a limited amount of funding from angel investors, venture capital firms, and similar sources.
If you want to succeed when you meet with potential investors, you need to keep three key factors in mind. These factors can help you separate yourself from the competition and ensure that you start pursuing funding to launch your dreams sooner rather than later.
The Importance of Pursuing Startup Funds
Every startup needs cash to grow and succeed. It isn’t a secret, but many startup entrepreneurs believe they can take their businesses to success without plenty of funding in their bank accounts.
Here’s the truth: unless you already come from money or you have funding from a previous business venture, you’ll need to rely on the funds of other people or companies to get your new business rolling. That’s just a fact of the industry!
You need that cash so you can:
- Build the infrastructure necessary for your business
- Hire employees
- Do market research
- Get equipment, etc.
All of this is necessary before you have a hope of turning a profit. Because of this, many investors will require something in exchange for their money. It’s often a cut of the profits, which you are supposed to deliver after a certain time. In this way, investor cash can be considered a type of loan.
However, other startup investors purchase shares in your company instead. They might buy shares that already exist (if your company is on a stock market), or they might have you sign a contract that says you will award them shares when you eventually reach an IPO (initial public offering).
In any case, you will need startup funds sooner or later. So it pays to plan how you’ll discuss those funds and approach investors and what kind of investing you should pursue at each stage of your business’s journey.
Have a Plan for Long-Term Growth and Push It
Planning is the first major thing to keep in mind when discussing investor cash. Specifically, you need to have a long-term one!
No investor wants to sit down with an overly enthusiastic would-be executive and hear about their idea, only to find out that said executive doesn’t have a clue about how they’ll achieve their goals. Instead, potential investors want to know:
- What your business is about
- Why you are interested in your business
- How do you believe your business will turn a profit both in the short and long-term
Long-term planning is even more important. Anyone can come up with the idea that can produce some cash over a few weeks or months. But only the best startups can turn profit months and years in the future; those are the companies that investors really want to get in on.
Do You Need All the Answers?
Not at all! However, you should bring the following materials to any investor meeting:
- A detailed business plan
- Your current cash flow, revenue, or operational numbers, if you have them
- Your plan to expand your company beyond its initial state
All this information can make a difference in your pitch to a potential investor. Especially if your company has already launched and you’re looking to secure money for expansions or an IPO.
Executives don’t expect you to have all the answers. But they expect you to know where your company is going and, perhaps more importantly, how you’ll take it to that successful state.
Network, Network, Network
The next major thing to remember is to network. You should network before, during, and after meeting with any potential investor.
Networking is the social bedrock of investing in startup capital. Very few investors will want to risk their cash on your brand or business if they don’t know who you are or if they don’t believe you’re a social force in your industry or niche.
Simply put, you need to know people to make money. However, you also need to express yourself enthusiastically and persuasively to would-be investors.
An investor will want to know:
- Why are you so committed to a specific business decision or vision? What makes your company so important to you as a person?
- Who you are as a person, so they know what your leadership style is likely to be, where your goals and priorities are, and more.
- What do you want to achieve on a personal level by launching or expanding your business? Of course, you certainly want to make money, but many investors want to know what you desire beyond this. Lots of investors prefer investing in people they can see themselves in.
How To Network Well
Fortunately, modern technology has made networking and social communication easier than ever. You should leverage the following strategies to network well before, during, and after your startup cash meetings:
- Use social media all the time. Friend people on platforms like Facebook, Twitter, and LinkedIn to build a professional online network of peers and business associates.
- Always hand out your business cards to people you meet. You never know when someone might be an investor and the right person to fund your company’s next expansion phase!
- Be personable and friendly to everyone you meet. Try to practice smiling and speaking enthusiastically, as well as active listening. There are many ways to persuade an investor to take a chance on your business, and being charismatic is one of them.
During your meeting, try to network by bringing up people the prospective investor might know. If that doesn’t seem to work, try to be personable, honest, and forthright. Even if you aren’t right for one investor, they may refer you to another investor who could be better for your business needs if you impress them personally or with your networking abilities.
Know What Funding You Need and What You’ll Discuss with Investors
Last but not least, you must know what kind of investment you need and what funding an investor will discuss in your meeting. When you fight for startup funds, you don’t need just cash. You need specific types of investing, which can have different impacts on your business’s structure, what you trade to the investor for their money, and more.
Key Types of Funding To Keep in Mind
There are lots of different funding types you should remember or push for depending on your business’s state and financial needs. These types include:
- Pre-seed money. This funding can help you establish your business base or launch your startup from a basic idea. It’s often the initial form of funding pursued by entrepreneurs. An example of pre-seed funding is money you receive from family and friends.
- Seed funding. This next funding stage can help you grow your business, get equipment and hire your first employees so you can start earning a profit and proving that your business idea is sound. An example of seed funding is crowdfunding or venture capital/
- Angel funding is usually for higher-level businesses that either have good revenue streams or expect a good bankroll to show up soon. Angel investing funding is also quite rare, and it’s contingent on finding an angel investor who believes in your business idea.
- Accelerator or incubator funding. These funding types are appropriate for growing your startup business or financing and expansion, though their appropriateness depends on your industry and the kind of business you run.
Since you can pursue many different types of funding, you should speak with your financial team or do some research before setting up a meeting with any potential investor. You don’t, for example, want to speak to a seed investor when you need a bit of extra cash to get the ball rolling and finance the earliest stages of your business! For that, you’ll need a pre-seed investor or company.
As you can see, knowing what to talk about and how to broach it with potential investors is key to securing the startup income you need to succeed in your business’s earliest months. However, you can and should use other tools to speed your business along on its journey.
For example, SPD Load is an effective and versatile software development company for all early-stage startups. We can assist with the discovery phase of your app or software, as well as provide UX and UI design, web design, and other design services as necessary. Discover how we can help your business succeed today.