Raising investment for your startup is a process that’s lengthy, complicated, time-consuming, exciting and yet indispensable. So, before you decide to approach any investors, you need to have a step-by-step account of what to expect on your journey to investment.
A typical startup funding process goes through these 5 steps:
1. Define your goals and objectives
This is your first step. Outlining your funding goals and objectives serves as a roadmap to achieve success.
Why you need the money? The answer to this question should associate with your business objective. If you don’t have your goals and objectives clearly defined, your potential investors will have a tough time understanding where their funds are going to be utilized. So, less clarity means fewer chances of you getting the funds.
Your investors may need clarity on:
What are you planning to do with their money?
Why and where you’ll apply these funds?
To answer these questions, you may have to create a budget and that’s our next step.
2. Create Your Budget
Your budget should show the investors that their money will be used appropriately. Consider the following expenses in your budget:
- Equipment costs depending on the nature of your business.
- Human resources expenses such as employee recruitment, training, payroll, benefits, etc.
- Legal costs associated to fulfil mission-critical legal responsibilities.
- Marketing costs include a budget for website development, social media, advertising, and more.
3. Decide how much you need
Now that you have goals and budget in place, the next step will be to analyze how much you have and how much you need.
There are quite a few funding options to help you meet your company’s financial demands. Some of them are crowdfunding, business loans, angel investors, personal loan for business, venture capitalists (VCs), etc.
Choose an appropriate funding option depending on the stage of your startup and how much you need. For example, angel investors are best to get your business off the ground while VCs are best when you decide to expand your business.
4. Research for investors
Start your search for an investor by following these helpful tips:
- Reach out to connections in your network, who either have fundraising experience or are well-connected and may be able to introduce you to potential investors.
- Take advantage of online communities and research tools to access investors information.
5. Work on your pitch
After you’ve found the right investor, it’s time to pitch. But, make sure your pitch is perfect.
- Collect all the documents you need.
- Make sure your business plan and investor pitch deck show the potential investors why your business is investment-worthy.
- Paint a compelling brand narrative whenever possible. Give your investors reasons why they should invest in your business right now and what’s at stake if they choose not to.
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