Despite the global economic recession and the COVID-19-induced obstacles to funding, the Indian startup sector has seen multiple businesses reached the desired $1 billion mark in 2021. Several of these startups, who have emerged as game changers, have demonstrated an exceptional capacity to withstand crises and develop flourishing and thriving ventures. Startups are all on achieving product/market fit and developing a lucrative and scalable growth plan. The startup funding stages are dependent on various criteria, including the types of funding for startups, having the correct initial establishing team in place, bringing in industry leaders such as advisers, producing a functioning prototype, and product testing with a sufficient proportion of users to show good traction. Here is some fundraising advice for early-stage business owners, particularly first-time fundraisers, to help them through the process.
Self-funding in advance
It is critical to contribute your own money to the firm. Self-funding, often known as bootstrapping, assists you in developing business sense and managing expenses over time. Withdraw an amount from any savings you may have amassed over your career, or seek assistance from friends and family.
Investing your money also shows your commitment to the company and will help you attract new investors and the startup funding stages. Many successful companies began operating their firms without the support of external funds. They were able to tide by until they reached substantial commercial growth while raising capital for minimal equity through investors, which appeared like a sensible bargain.
Everything revolves around timing.
When the timing is ideal for startup fundraising and your firm is doing well, you will have easier access to possible investors to improve the stages of venture capital. If you contact investors too soon or late, you may get unexpected outcomes. If you attempt to raise cash when you aren’t ready, your talks and, therefore, your prospects with investors will suffer along with the stages of venture capital financing for your business.
As a result, your startup’s growth will slow, and you’ll be physically and psychologically exhausted. Furthermore, if your firm is doing well, there will be greater demand for your round, allowing you to raise funds at a better price, own more of the business, and influence the conditions.
The key to success is preparation.
Creating term sheets (papers listing investment and collateral terms) and approaching potential investors takes several months. If a firm needs money in six months, the owners should already have a business strategy in place so that they may begin communicating with investors right away. It’s critical to exhibit your passion and devotion to the enterprise and effectively express your ideas while demonstrating any solid market research you’ve done. This study should be centred on your company plan and cover critical areas such as problem detection, business model, troubleshooting, market size, etc.
Incubators and accelerators can help you boost your game.
Incubators and accelerators provide entrepreneurial skills and guidance to guide your firm on the correct path, examining it through the perspectives of scalability and sustainability. Affiliation with these networks of business-savvy people boosts the likelihood of companies receiving funding.
Through the accelerators and incubators you join, you will create valuable relationships with investors, mentors, and other entrepreneurs. These programmes, which typically last three to eight months, include networking opportunities, education, workspace, mentorship, networking opportunities, investment preparation, and the necessary financial and legal counsel.
Angel funding
Angel investments are associated with high net-worth people who are seasoned business people who’ve invested in innovative but inspiring entrepreneurial ventures. Their investments assist committed and prospective individuals who hope to establish business ventures based on such concepts and provide a strong return on investment. They invest in early-stage enterprises on the stock exchange (often 10-30% of the company) or convertible debt. Angel investors are frequently organised in networks, but you can also locate them through personal and professional relationships at startup meetups, technological conferences, contests, incubators, and accelerators.
Collaboration through networking
Strategic networking can help your startup’s fundraising efforts be a smashing success. You must identify well-connected professionals and incubator and accelerator platforms to connect you with the proper investors. To summarise, your network is proportional to your net worth.
Whatever sort of funding you choose for yourself, ensure your plans for ‘return on investment’ are adequately executed. Remember that money is not a replacement for a hard effort. Even if you’re capable of raising significant funds and hiring people, you’ll still need to make strides for your company’s operations to follow the growth of your business at each stage closely.
