Cash is king. Virtually every entrepreneur and individual who has gone into a business realizes this early on. Startups need money if they’re going to survive – fact. But asides from bootstrapping i.e raising funds for your business from your pocket and from family and friends – which can only get you so far, investors are probably the surest way to get funding for your startup. As far as amount and timing are concerned, getting funding from investors is arguably the most effective way of raising money for a business. But how do you know that investors will have sufficient interest in your company? How do you know they will be interested? These are 5 things that you could be doing wrong in your approach to get funding and fixing them will see you increase your chances of getting funding for your startup.
- You are pitching to the wrong investors: like most other people, professional investors and even members of crowdfunding platforms have their areas of expertise. If an investor is into tech devices and enterprise software, the chances of them being interested in investing in say a line of fashion items and accessories are thin at best. Before you pitch to a prospective investor, do research on him or her and find out what their niche is. Chances are that the investors you will get funding from are those that are interested one way or another in the industry you are targeting.
- Your target customers aren’t interested in your product: investors need to see interest by your target demographic in the product or service you’re offering before you get funding from them. Even if your business is in the phase before it starts generating revenue, and you as a CEO have convinced the investors of your prowess as an entrepreneur, potential investors want to know that you have engaged customers with your business idea. Customer testimonials and case studies in your favour can convince an investor that you are gaining some traction with your target demographic.
- Your startup team is weak: the effectiveness of a team is wholly dependent on its members. You must scrutinize your startup team thoroughly and analyze their effectiveness without any bias. This is a difficult assessment to make but it must be done. No matter how effective you are as a CEO, you can’t do everything by yourself. You are only as strong as your weakest link. Before seeking to get funding for your startup, make sure you have a reliable, dedicated team that you can rely on to get the job done.
- Your growth is slow and steady: most investors will only put their money into a startup that is already showing exponential growth. Linear growth, on the other hand is only acceptable for businesses that are being operated on the side. Most people think that exponential growth comes only after they get funding, but this is a myth. Funding has almost never changed linear growth to exponential growth. Investors most likely will put their money into a startup that is already achieving exponential growth to further accelerate it.
- You can’t identify your unique selling point: prospective investors only want to put their money into a company that has something unique and valuable to offer that will most probably grow with time. If you haven’t identified what this is yet, or you just don’t have any unique feature your business offers, then investors will have no interest in funding your startup.
The fact that you want to get funding or think you need it for your startup doesn’t mean you will get it. Analyze your startup honestly with the points outlined in this article. Does it look and feel like something an investor would be interested in? If your honest answer is no, then set about fixing the aspects of your startup that need fixing.