As an entrepreneur, you are entitled to feel a sense of pride in “going against the tide” and launching a self-driven, innovation-laden startup. That being said, the fact remains that you really cannot expect your venture to take off unless it is adequately funded.
Consider These Stats:
- About 8 out of 10 entrepreneurs crash within the first 16-18 months of starting their venture, which makes up for 80% of all startups that fail, mainly due to cash paucity.
- Over 50% of small businesses that commenced in 2011 failed within the first four years, and only 3% were able to get into the fifth year.
- Only about 30% of all small businesses can break even while another 30% end up losing money almost continually.
That is only one part of the problem. The bigger challenge for most startups is that it is much harder to get your startup funded than it was in the past, simply because there are far too many startups vying for the much-coveted funding.
Inexorably, investors are setting higher benchmarks for every startup because they want to ensure that their money is parked in a concept that has a promising future.
Many startup founders erroneously opine that they need to raise huge chunks of up-front money to go forward. That is just not true. As an entrepreneur who is competing with thousands of equally (or more) driven startup founders, you need to play your cards right and do different things differently.
Here are 5 tips that could make funding easier for startups:
Be Prepared to Fund Yourself
If you are unwilling to investment your money or resources into your venture, regardless of whether you actually do it, don’t expect investors to put in their money either.
Because they won’t.
Investors are smart people who know what they are doing. They are interested in ensuring whether you know what you’re doing, which is why they tend to prefer entrepreneurs who reflect some confidence with cash and are not content with sweat equity.
Master Your Business Plan
The business plan that you present to investors makes or breaks the deal. Therefore, you may want to go beyond superficialities and make it evident that you know your plan inside out. Not only that─demonstrate that you have chalked out a measurable strategy to accomplish your goals.
Furnish insightful market information about your competitors and target audience while extrapolating on financial metrics and the overall vision of your startup. In case your venture entails launching a product, talk about a specific date by which you intend to launch it.
Going the extra mile while sharing your business plan can make that elusive difference in the end.
Don’t Rule Out Other Sources
These sources of money include RFPs, grants, loan programs, etc. While they are easy to overlook and may not work out for all companies, it is not a good idea to say NO without thinking through it. For example, it makes a lot of sense to seek a federal grant for some industries, such as renewable power or biotech.
Moreover, many states are initiating grant programs that offer loans at reasonable interest rates to promising business ideas.
For a startup, every penny counts, literally. Thus, it makes sense to pay while you earn to manage your financial and other resources better. Bootstrapping at every stage to attain a good market validation can make it much easier to raise funds.
Here are some ideas to save costs:
- Defer capital purchases
- Co-locate with other offices
- Use existing equipment like computers
- Sharing office services
- Striking a mutually beneficially deal with suppliers
- Eliminating travel expenses by teleconferencing
- Approaching interns from local business management schools
Networking and More of It
Often, the best mean to get funding or to access people who can help you get the startup capital is to network. Remember, networking is an ongoing process and MUST NOT stop anytime.
Meet with like-minded professionals on LinkedIn who may want to know more about your startup and take it from there.
Sharing office space with those who can help you connect with investors is another great networking strategy.
Mistakes are inevitable, so don’t be afraid to try out new ideas if you are truly convinced about them. Failures tell you about the things that don’t work for you, so learn from them and move on. The most important part is to believe in your ideas and keep your motivation levels high, no matter what.