It’s what everybody wants! Although it can be a tad bit difficult, but in actual fact, there are startups who know exactly how to get funds and they almost always get it.
There isn’t a single formula or line of actions to get funds but there are reliable steps guaranteed to speed up the process. Here are 7 you can consider.
1. Have a business idea that can scale
Business idea that don’t scale rarely create values for investors. To get funds for a startup, there are series of questions that need to be answered.
What is the demand for your products or services? Do people actually want what you are providing? The worst thing that could happen is having products or services nobody wants.
The number of potential customers, who they are and their location.Who are your customers? Where are they? How big can they get ? How fast can they increase?
Why will your products or services appeal to potential customers? Why should anybody want your product? What differentiates it from others? What edge do you have over competition? What new problem are you solving?
Who are your competitors? Do you know them? What is their market share? What tactics can you learn/borrow from them?
What is your unique selling proposition? If you can’t answer this question there’s no point going ahead with it. Your unique selling proposition is your big gun, it’s what you should pull out to wow anyone who shows interest in your product or service.
These are some of the questions you need to answer to ensure you have a business idea that truly has the potential for growth.
2. Validate your idea by building an MVP
The next thing you should do is to validate that idea by building an MVP (minimum viable product).
Eric Ries in the book The Lean Startup defined MVP as the version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.
In simple language, you could call it a prototype, but it’s more than that. It’s a very basic version of your product or service that you market to test your assumptions about your business model.
Creating and working with your MVP means releasing a bare-bones product, so that you can learn what people want and don’t want without going all out and wasting too much resources.
Based on what you learn, you can then make a fast adjustment and create a product that is desired, valuable and useful to your target audience—-or you can scrap the idea with minimal investment.
3. Get traction with early users
You need to show that your product is solving a significant problem. Sometimes, it’s not as if your target customers cannot see the solution your product is offering, it’s that they cannot see the problem it is solving. See things from your customer’s point of view. Why would the customer need your solution? Does it make a difference? Why is it the best?
You also need to show growth. People want to see if your product is making impact and growing or if it’s stagnant. For instance, if you have a platform that connects teachers with students, you need to show growth in the number of teachers signing up and getting hired month on month.
4. Prepare a pitch deck that shows your story
A pitch deck should ultimately not mean long boring documents full of numbers and indecipherable words. Your ideal pitch deck should be short and straight to the point.
Keep in mind, the purpose of your pitch deck is to get you meetings with investors. Your pitch deck should supply valid information like: Vision, Validation, Market Opportunity, The Problem, Product/Service, Revenue Model, Marketing/Growth Strategy, Management Team, Financials, and Competition.
If you finally get that meeting, make sure you are saying what the investors want to hear. Tell your story, show them the why behind what you do. Here are a few tips to help you put that ultimate pitch deck together.
5. Be active in the startup ecosystem
The truth is venture investment is about who you know. It’s unlikely you will get an investment from an angel investor or VC without referrals from a known channel.
You need to build a solid network around yourself. Attend conferences, do hackathons, organise/take part in competitions, join an accelerator/ incubators.
Co-working spaces could be a great source of networks too. Sharing an office space gives you the chance to mingle with a lot of people who have money to invest or know of trusted investors.
6. Send monthly updates to potential investors
This is one hack that works very well. All you have to do is build a list of potential investors, send them monthly updates of your traction.
Doing this will do three things for you:
1. Give you visibility and keep you at the top of their mind
2. Show your growth curve
3 Indicate how diligent you are
7. Know your numbers
The truth is a lot of entrepreneurs don’t know their basic numbers. You need to be able to say how big your target market is as well as your customer acquisition cost (CAC).
Whilst acquiring new customers is always something to be happy about, you need to show how you got those customers. You need to account for your time and human resource you spent in acquiring them. These combined are referred to as your CAC (customer acquisition cost).
You need to be able to supply what your profit margin is and how much you need to break even.
Even more important questions, How much you are raising and what do you need it for? How long with it last you ? What will you achieve with it?
When you are able to provide convincing answers to these questions, you come across as someone who knows his stuff. Which is something investors are always searching for in entrepreneurs.
If you have more questions about how you can get more funds among other things, our Side Hustle Bootcamp for startup founders might just be for you.
Join 24 other founders on a rigorous weekend of practical skills and intensive learning on how to ideate, start, run and get funding for your own tech-enabled business. Apply here
Photo Credit: Christopher Halloran | Dreamstime.com