Fundraising can be an essential part of any major venture. If you have a great idea for a startup, but do not have the cash flow to fund it you should look into different fundraising strategies. Even some of the largest companies have a variety of fundraisers to offer them financial support. Selecting the right option for your startup can be a bit of a process. It's best to start by reviewing the strategies listed below and identify the fundraising option that best suits your needs and fits your business structure.
Identify All Potential Investors
It is important that you're targeting the correct investors and not just blindly conducting outreach, as not knowing who you're targeting can amount to a colossal waste of time (and this potentially translates into a loss of funds). One of the main ways to find investors involves creating a list of potentials and then narrowing it down with specific criteria.
Questions to ask when narrowing down your list include:
- Has this individual invested in a direct competitor?
- Is this investor focused on a specific industry, and is it mine?
- Is this individual still actively investing?
By asking these questions, you'll better identify potential investors for your business, and eliminate the ones that don't make any sense.
Have a Plan of Action
Once you have narrowed down your list of potential investors, you need to be ready move on it. This involves knowing the best way to contact your potential investors and having your proposal already prepared. Know critical factors that may sometimes be overlooked, such as potential future revenue and how much funding is needed.
Also be prepared to speak honestly and openly about any weaknesses in your startup. Have a list of references prepared, and make sure that these individuals not only know your business well but that they are aware they are being used as a reference.
Know Your Options
There are many different types of fundraising options available for startups. For example, grants are available as an option. Grants are typically allotted in small awards, but these disbursements of funds will be essential to the daily functioning and survival of your company.
Crowdsourcing is also an option for funding. With this option rather than traditional investors the public offers funds to campaigns. Internet platforms such as Kickstarter and Indiegogo have highlighted the popularity of crowdsourcing in recent years. It all comes down to what will work best for your business.
Fundraising is crucial to any startup. How you go about acquiring funding is different, but the steps that one should take prior can be pretty standardized.
Understand Investor Mentalities
Investors want to feel secure in their investments. Provide them with the information they need to make a smart decision up front. Do not sell your organization short to investors, and be sure to provide them with a potential growth model. Also, be aware of all of your options, there are different forms of fundraising available and some may be better suited to your startups culture.
Your specific fundraising strategy is dependent on your particular business. Spending less time on fundraising is better, but you have to consider whether focusing on a small group of investors in a limited time frame is more likely to hurt you financially.
Set yourself on a timetable with any smaller group of investors. If you don’t see results within the allotted period of time then widen your pool of potential investors and extend your time frame. Again, make sure that these potential investors are a fit for your startup. Although you are adding more to the group that does not mean that requirements should be slack.
Follow these four fundraising strategies, and you should be in a better position to secure capital for your burgeoning startup. Have you ever gotten funding for a startup company? What other techniques do you know? Tell us down in the comment section.
Miles Young is a freelance writer, business advisor and tech geek. When he's not writing about the latest tablet and laptop deals, he's at the beach or walking his dog Max. You can follow him on Twitter @MrMilesYoung.