By Fernando Berrocal

‍

When startup founders don't see successful results as quickly as they would like in their fundraising campaign, they get frustrated. This is understandable as any effort spent fundraising is effort spent not creating or selling. Fundraising has a high opportunity cost. As a result, it's critical to have reasonable expectations and a well thought out strategy. You risk wasting your time if you don't, which may be catastrophic for a startup in its early stages. Here are five tips you should follow to effectively finance your idea. 

Step 1: Determine your Startup's Funding Requirements: Make sure you know what stage your idea is at since it will determine whether investors are interested in you and what they want you to present to them. Have you done any idea validation if you don't already have a product? If you haven't already, bootstrapping such efforts before spending a lot of time fundraising is an excellent idea. You'll have a hard time closing a transaction if you don't have proof of real interest in your concept.

• Pre-product or post-product? Are you trying to raise money to create and test a prototype?
• Pre-revenue or post-revenue? Are you able to back up your claims with financial data and growth?
• Pre or post-product-market fit? Are you still looking for the right match, or are you feeling the market's pull and needing funds to fuel your exponential development efforts?

Second, how much money are you looking to raise and what will you do with it? You shouldn't fundraise just because that's how startups operate. Be clear rather than vague about this, and you should have a definite purpose. Investors will be able to determine if your specific proposal suits their investment profile and preferences. Keep in mind that the fundraising process might take from six to twelve months.

‍

Step 2: Research the Investment landscape and identify your potential backers:  It's critical to focus on the proper clients if you want to be successful. Similarly, if you target the correct startup investors, you'll reduce the amount of work required to obtain funds. Trying to persuade a fund to invest in your project if the fund's investment profile does not match yours is nearly impossible. If you're talking to a startup investor about your concept and know that they won't be interested, ask them to recommend you to other investors in their network. Networking and looking for the appropriate individuals are good methods to spend your time and effort when fundraising. Keep in mind that most startup investors mention on their websites that they do not accept calls. Getting someone to advocate for your idea is the first vital step in establishing a real relationship in a startup. As a result, enlisting the help of people who have worked in the startup world in some capacity in your project might pay off in the long term.

Step 3: Communicate what makes your business an attractive investment possibility:  Recognize that investors aren't searching for a way to assist entrepreneurs. They're on the lookout for a way to make money. In this way, fundraising is analogous to B2B sales. Given that you've already selected the most likely investors, all that's left is for you to sell your startup as persuasively as possible. You must comprehend startup investors' "problem": they are hunting for the best businesses that meet their investment profile.

Make sure you understand your comparative advantages so you can utilize them straight away to make an impact. Pitching is only the beginning of this communication process; it does, however, provide an overview of the project. It's crucial to personalize your message to the specific demands of possible investors during follow-up interactions.

‍

Step 4: Get ready for the long term, cultivate relationships and keep moving forward:  The average time it takes for a startup to raise funds is 3 - 6 months. If you have a track record of successful business exits, the process may move faster. If it's your first time, six months may be a conservative estimate. While you're unlikely to do much in a month, if you focus on identifying and cultivating investors for six months, you're highly likely to exceed your expectations. The major reason for this is the same reason that venture capitalists dislike cold calls. It takes time to build confidence in a startup, and it doesn't happen overnight.

Building a relationship with your investors is essential to closing a fundraising round. Assist them in comprehending your project while also recognizing their distinct expectations. Not only will this improve your chances of finding investors, but it will also improve your chances of finding suitable ones for your business.  As a result, getting the most out of your fundraising time is critical. Demonstrating visible progress while talking with investors is one of the most persuasive arguments you can make. It demonstrates to investors that the train will leave with or without them, which is typically the final push needed to persuade them.

Step 5: Get a response: Make sure your offer has an expiration date. Don't make it too short - as you won't be able to lay the necessary fundraising groundwork in a month.  Saying that your fundraising round would conclude on X date, on the other hand, can assist you to persuade the initial investor to take the risk. If you're still having trouble, it's reasonable to believe you need to concentrate on making your business more appealing to investors. You can make another push whenever you've made modifications or reached objectives on your plan while bootstrapping.

Ready to bring your startup to the next level? Apply to MassLight’s next batch. MassLight supplies capital and a dedicated tech team. We take equity in return. Have questions? Refer to our FAQ page.

‍

‍