The process of raising money is one of the hardest parts of starting a business, particularly in the beginning. In the beginning of a business, finding the correct investor who can help the company grow is just as important as having the necessary capital.
Investors are now concentrating on the fundamentals of startup companies and are stricter with their evaluations after two years of sizable checks and increased valuations. But times of crisis also present founders with chances to develop long-lasting businesses.
Here are a few considerations for entrepreneurs
aiming to build a sustainable enterprise as you begin to craft your pitch:
1. Know your business and its numbers
Describe the issue your company is addressing and the strategy it is taking to do so.
The issue, the proposed solution, and the business model must all be clearly presented in a compelling pitch that the founders have prepared, supported by pertinent data and research. Investors would grasp the business model and the product better with the aid of case studies or user examples.
When crafting your proposal, keep the following in mind to emphasise:
Market size (domestic and international in some cases)
Your revenue model, current sales, margins, and user base
Equity splits
Cost of products
Competition data
2. Create a realistic future plan
Early-stage investors are placing their faith in the group’s ability to create a profitable and long-lasting company.
It is essential to be open and honest about your company’s state so that you can make future plans appropriately. Make sure your pitch has specific short- and long-term objectives as well as workable strategies. Investors will have more faith in your strategy if you can demonstrate your prior success in achieving your goals. Don’t make irrational business projections and objectives.
3. Valuation games
In essence, valuation quantifies the value of the company and aids investors in estimating the proportion of shares they will receive in return for their investment. A founder at an early juncture should look for a realistic valuation that reflects the company’s situation at the time of the fundraise.
Early-stage investing is frequently dependent on the startup idea, founding team, and the investor’s preference, so determining startup valuation differs for early-stage and matured stage businesses. The total addressable market, market dynamics, founding team, and founder-market fit can all have an impact on the pre-money value.
Angel investors typically seek lower pre-money valuations and greater equity because they take on more risk.
4. Discover the ideal partners
Funding in the early stages is not just restricted to money. The proper investment partner can give founders access to mentoring and business-building advice.
The startup’s founders should do their study on potential investors and get in touch with them. To do this, founders should consider why they are collecting the money and which investor would be best able to assist them with their immediate needs.
5. Networking and relationship building
Your proposal will be rejected more than once; rejection is a necessary part of the process. However, a door is not always locked when you are rejected. Investors might occasionally be interested in your company, but they might not be the best candidates at that particular moment.
Building a relationship with them will be easier if you keep in touch with them and give them frequent updates on your success. You can occasionally ask for their assistance and counsel as well. As a result, they will be more likely to remain interested in your company and either join you when the moment is right or introduce you to other potential investors.
6. Have faith in yourself
Be willing to pick up new ideas from potential investors; they have experience with a variety of companies like yours and can offer insightful advice on how the company can succeed. Additionally, it’s critical to have confidence in your own narrative and the ability to choose actions that will benefit your business the most. Both the narrative and the numbers are significant. Since you are the one who knows your story the best, you ought to be able to boldly tell the investors about it.
