One of the top ten reasons why startups fail is lack of financing and investor interest. That is why fundraising is an important part of a startup journey. There are some principles following which might increase your chances for success in closing your next investment round.
1) DON’T RAISE MONEY TOO EARLY
First and foremost, you will probably give away too much equity. Secondly, as soon as you get an investor onboard, you will become obliged to approve and confirm your decisions, which is not always easy and prompt. That is why it’s better to get as far as possible on your own and then find a partner to boost your growth.
2) PLAN FUNDRAISING BEFOREHAND
Start raising financing before running out of funds. Because it can take as long as six to nine months to finalize the fundraising process.
3) ENSURE YOUR STARTUP IS FUNDABLE
There are industry standards toward startups at each stage of development. Investors won’t talk to you unless you meet those. Check that your progress, cap table, team composition, tractions, etc. is sufficient before you start fundraising.
4) CHOOSE YOUR INVESTOR RIGHT
Remember that as investors will perform due diligence of your startup you should make the same in their respect. Don’t accept every offer you get, select the perfect investor for your startup. Investors shall bring value not only with their money but with expertise, network, support.
5) NETWORKING IS AN ESSENTIAL SKILL FOR A STARTUP FOUNDER
Start building your network of investors as early as possible. Mind that investors’ relations are like any other kind of relationship; they need to be nurtured.
6) GEAR UP FOR IT
You should be fully armed before you kick off the fundraising process. Prepare all the necessary documents, make up your mind on how the deal should look like, agree with the core team, check that everything works well within the team, with the product, and with your clients. Note that some doors can be opened only once.
7) FULL COMMITMENT
Investors expect you to be focused on running the business and dedicate 100% of your time to it and not to have any side projects that distract you.
8) PLAN WELL
When raising funds, you should not only plan how you will spend the money, but you need to think about the results you want to achieve, the roadmap, and the next rounds. You can’t look for new investors every 6 months as in this case there is no time to actually perform.
Keep all this in mind and go get funded!