Most of the time it becomes challenging for startups to define a starting point due to the financial constraints involved. The business always reaches a point where you need a venture capital. Sometimes, people indulge in the wrong avenue which to some extent is a waste of time and have a negative impact on their ideas. The following are some of the key highlights to bear in mind while raising funds for startup.
10 Keynote to take before raising funds for startup
1. Type of business
Some business ideas can form a sort of investment but these are not worth venture investment. Business potentials do vary and capital that leads to investing also varies. Some business might require bank loans when compared to the business returns. Understand the market size before raising funds for startup.
2. Know the parties involved
Nobody would want to lose money. Before committing funds for investment, progress must be tangible. Venture investors will have several meetings so as to reduce the risks in the transaction. The risks are always minimal if you have ever worked with them before as they would know you. Of course, not all people you partner with are equal, but they assess mutual benefits in the deal before investing funds for startup.
3. Process of funding
Understand the dynamics involved in each funding aspect. Different venture firms have different processes and procedures for releasing funds. Approval of funds varies but mostly through meetings with partners. Cash requested will determine the number of meetings a venture will hold. Your presence sometimes is needed before funds get approved for your startup.
4. Self-start up funding
Venturing into a business with self-funding is very common. This gives a positive impression to the investors of your capability and seriousness to manage the business. People trust your ideas and are also willing to take risks. With self-funding, you get to take full control of the business unlike when you get venture capital where they are the ones who have managed it. This always develops a negative effect on your business which decreases potential sometimes.
5. Family and friends
Family and friends are people who know you and your strengths better. They chip-in to support your startup, although, with pros and cons attached. They might believe in your abilities but lack experience to bring on board. They might not be willing to lose money and relationships with them might become haphazard. Choose wisely who to go for support especially those who have knowledge about business as they understand the risks.
6. Execute right decision
Be clear about your business aspirations otherwise you can fail terribly. Understand what you really want (are you a small or big business entrepreneur) or become a boss on your own.
7. Investor’s terms
When investors are interested and convinced, they offer the startup with the term sheet. This outlines the terms and conditions of the investment. This defines the company’s valuation and rights of the investor. All the terms accompanying the business are highlighted. This process will help them understand who you are. Startups should understand well what they are getting into.
8. Failure is part of learning
If you want to succeed you must work hard. Doing business should be fun. Challenges are there but how you handle them is what matters. Sometimes we fail and learn from our mistakes.
9. Engage with other entrepreneurs
Develop a relationship with other entrepreneurs. Be part of their discussions even if you don’t contribute anything. Even if you lack experience don’t develop any fear. You will get something positive to help your startup. Expose yourself, attend their conferences and practice what you learn.
10. Organize your team
For your startup to function effectively, you must bring a lot of focus to your team. Most startups fail because of lack of reliable and up to the mark people. An organized and well-planned team functions efficiently.
In any startup, a key player is a mentor. They have enough experience to share, train and give relevant advise beneficial to the business.