2021 is a great year for innovation and startups. Especially in the field of technology. Where even after the global pandemic, technical advancements did not cease. But apart from technology, there were several other startups that came to light amid the pandemic and turned out to be thriving.
So if you have an idea you have been playing with for a long time, now is the time to work on it. Once you are done with the ideation and planning, the most important question will appear in front of you. How to raise funds for your startup?
Raising funds is a cardinal part of your startup journey. Not just initially but along the way too you will need funds for various aspects of your business such as prototype creation, product development, or even, legal and consulting services. Having a well-defined plan will give you a limpid idea about your financial needs. And so you can manage your fundraising expedition accordingly.
Fundraising can be a daunting task. Especially if you are looking for pre-seed fundings. The first startup capital is always the one that will take the most time. In case you have already done it before, then it won’t be that difficult for you the second or third time. Because chances are that you already have a close circle of investors who are willing to invest in new things.
But let’s talk about the first round of fundraising where the situation is going to be slightly different and tasking. As you are new in the startup game and are looking for investors to give you their hard-earned money, you will have to be apt and very much clear with everything you pitch to your investors.
Let’s take a look at how to raise funds for a startup and the different phases of fundraising if you are looking for investors.
An initial introduction with the investors
This step is your first chance to make a good impression. You have to be ready with all your plus points and gather all your achievements that you might be able to show your investors. Besides the achievements, you have to also forecast your financial needs so that the investors have a clear idea about what are your initial plans with the startup.
Pitch deck or executive summary
Now, this is the step that is no doubt one of the most crucial steps. An entrepreneur is already successful in raising funds if he or she has mastered the art of storytelling.
In this case, you will be able to tell your story or your journey of this startup through the pitch deck. But with a maximum of 15 slides. Don’t make it too long as you might end up losing the interest of your investors. Make it creative and don’t lose focus on your goals and plans with your startup. This alone is enough to showcase your startup in good light and make them want to know more or even invest in your dream.
Lagging behind in the pitch deck stage? This is one step that you just can’t afford to be average at. At Applify, we have experts who will craft the best pitch decks to help you impress your investors and get funded in no time. Connect with our team now to get a sample today.
Reaching out to potential investors
Now that you are ready with that perfect pitch deck for your startup, the third step of how to raise funds for a startup guide is – to start reaching out to the investors. This might be your first phone call with them.
Try to be as transparent as possible and make that irresistible first impression so that they want to know more about your startup plan and even see you in person. A great phone call will go a long way when it comes to fundraising.
All you have to be is crystal clear about your goals and what you want to achieve in the long run.
Now that your first conversation with investors has got you to meet in person, it’s the time you get to showcase your personality, dreams, and goals regarding your startup in a much more efficient way. Go all out with everything you can think of to impress them and make them want to invest in your ideas.
Followup meets and proposals
This step will follow if your investors’ meeting went as expected. Now the road is easy. All you have to do is extend out your proposals and go on with the diligence process and share your documents. These last few steps are mostly dependent on the investors and their team as a lot of verification takes place.
Other options for securing capital for your business
Apart from seeking funds from investors, there are several other ways you can raise funds. In fact, today it is easier to raise funds than it was ten years from now. So while you already have your perfect investment opportunity at hand, don’t forget to take a look at other options as well.
Starting a business is not as easy as it sounds. You are in a motley of social as well as professional responsibility. Having several options in every aspect will only make things easier in the long run.
Here are some of the other options you can consider.
One of the ways you start your business is the old traditional style. That is, by using your own money. This way you can fund the initial stage of your startup and then look for investors to invest in your already established business. This is also a great way of showing how indulged you are with your venture and that you believe in it enough to invest your own savings.
Putting your money in the project shows that you are willingly taking the risk of putting the hard-earned money at stake, and supporting your idea with the faith you have in your company.
In crowdfunding, you can make a choice that is the best for your business such as rewards or equity-based crowdfunding. In my opinion, it is a great way to raise funds for artistic startups or manufacturing of new technology at a large scale.
This is a low-risk option if you want to put the product in the market and also get funds to finance your product and make it a reality. This way you can also get crucial feedback from the early adopters of your prototypes or product and you can make the changes accordingly.
Friends and family
One of the easiest ways you can answer the “how to raise funds for a startup” question is by asking for the money from your friends and family. As they have known you for a long time they will have a fair idea about your dreams, hopes, and talents regarding your venture.
But just like everything, this might also have a few disadvantages. If your startup is about something that might need expert advice and an experienced hand, your friends and family might not have it. In such cases, it is better that you look for professional investors. They will be able to help you along the way.
Need one on one advice? With Applify’s Start X Services you can now get advice in two one on one sessions with our Tech industry experts and find answers to your most important questions. So don’t wait around. Connect with us for those crucial mentor sessions.
Loan based funding
You can also take a certain loan from the bank to kick start your business. This will give you the initial backup and later you can do whatever is most convenient for you. But just like any loan, this will also put a certain amount of pressure on you. So if you’re confident enough that your startup will go as expected in the first round, this is a healthy option. Make sure to check the interest rates and also if you have collateral to give and also crosscheck with all the facts, whether you are able to comply with all the terms of the loan.
Competitions and shows
If you think your idea is sparking enough, you can always enter different competitions. There are several shows based on these concepts today like SharkTank that have made the concept of angel investors quite popular.
This is a low-risk option as the investors listen to your idea and if it is good, you can win the competition. Through the rewards, you can finance the startup. In case you do not win, being in that competition or show will act as a publicity tool for your idea and you never know angel investors may contact you to invest in your idea. It’s a win-win situation.
Get investment from venture capitalists
Venture capitalists are the investors who want to invest in slightly more mature companies and sometimes want to have more of a say in managing the operations of the startup. Since they have more of a responsibility to get a certain return, they want to invest in firms that are scalable and cash-flow positive and proven businesses.
If you think that your startup fulfills all of the above-mentioned requirements, you can apply for an investment with a VC firm. But one thing that you should keep in mind is just like with investors, here also, your pitch is crucial to obtaining funding.
I believe that by now you have a fair idea of how to raise funds for a startup. It might take longer for the first round of your fundraising but the experience will stay with you forever.
Don’t forget to constantly make new relationships while also nurturing your present and past ones for future benefits. Also, one lesson you should always remember is to keep more than one option in hand for your startup. So that you always have a backup if one doesn’t work out.
Fundraising can be challenging but only if you’re not prepared. If you are someone who wants to overcome all the resistance and raise funds smoothly, Applify’s Start X plan is your holy grail. From Strategy consultation to product development and documentation leave it all on us. Start a conversation with us today.