8 Things you should do before seeking funding
- Establish your company
- Assemble your team with technical, marketing and sales skills
- Undertake comprehensive preliminary market research and competitive analysis
- Set domain name
- Create a website or landing page
- Build a prototype
- Do real market tests with potential users and buyers
- Provide a complete analysis and P&L forecast along with the development strategy
All this may take a few weeks to work. But no matter what stage you’re at, it takes a lot of
time to raise investment funds.
Prepare investment promotion and investment memos, answer investor questions and demands and
prepare yourself for the countless obstacles of time and energy-consuming activities.
Startup Platforms
There are special platforms to help startup entrepreneurs. They provide information,
research and assistance in all aspects of launching a new project, including
communication with investors. For example,
Startups.co offers a convenient channel for
effective investor searches. Today, Startups.co has more than 14 million users, making
it the largest startup community in the world, offering exceptional opportunities to
attract investors both to finance the project and as consultants. Another platform,
Gust.com, has already invested more than $1 million in
various startups.
Network of Business Angels
Angel investors not only give you money, but also literally follow every step, prompt
and guide, and most importantly share contacts and introduce you to the business
community. You can start searching for such an investor on platforms like
Funded.com,
Angel Investment Network and
Angel Capital Association, where
thousands of investors are represented and the various types of investments are
described.
Crowdfunding Sites
Where can you find the most unexpected, non-standard investors? These are on
crowdfunding platforms. Starting from the widest Internet audience, where ordinary users
support projects they’re interested in (sites like
Kickstarter,
Pererbackers and
Indiegogo), and ending with philanthropists
wandering in search of those whose old dreams they can help to realise (
RocketHub). There are also accredited
investors, hunters for new ideas – for example,
OurCrowd.
Each crowdfunding site has its own specifics and its own way of attracting investors, so
carefully study all the options to choose the most appropriate for your strategy.
Business Incubators and Accelerators
Your startup is your child and you need to take care of it accordingly. If you want the
project to grow and prosper, consider the option of cooperation with an incubator or
accelerator. Such investors usually want to be actively involved in the implementation
of your idea – they want to help turn it into a viable business model and are ready to
provide the necessary funds to do so.
Often, such incubators and accelerators offer space in their office, so as to make it
more convenient to collaborate on a project. Since other startups work in the same
space, you get the opportunity to exchange ideas and find non-standard ways of solving
problems. Find the nearest business incubator or check this one –
InBIA.
Startup accelerators, such as
500Startups,
Ycombinator and
TechStars, offer advice, small start-up capital
and access to other investors in their network.
Social Networks of Professionals
Everyone knows the social network
LinkedIn,
where you can still find investors. In addition to it, there are many professional
networks where you can cross paths with potential sponsors in your industry. Many of
these sites are even ready to connect you with institutional investors from other
countries who wish to join the global business space, and even ready to deliver your
products to their country. Among such social networks should be noted
EFactor,
Startup
Nation,
Xing,
Cofoundr and
Meetup.
Direct Investment Market
Sometimes it’s safest to take the long route and contact a private equity firm.
Moreover, the volume of these investments can be from several thousand to millions -
depending on the potential that they see in your project. The goal of such companies in
this case is to sell their share several years after investing and thus to profit from
the development of a startup. According to data from the
Private Equity Network, direct investment
companies have invested $ 347 million in 2100 companies over the year.
Online Loan Platforms
The increasingly stringent restrictions on obtaining bank loans lead to the fact that
for a startup it is much easier to raise funds from alternative sources – for example,
via online platforms that perform the same functions as banks. These can be P2P sites,
unconventional funds or large investors willing to help small businesses and make a
profit on the terms of the loan. Among the well-proven platforms are
Ondeck,
Prosper and
Lending Club.
Doing the Marketing Yourself
Without marketing, commercial success is impossible. On the other hand, successful
marketing, if you do it yourself and make it a part of your personal brand, will not
only save you money early on but will also attract serious investors. You should
position yourself on a personal website, on social networks, in guest posts on
authoritative blogs, in
Quora communication and in traditional media as
well.
Friends and Family
It can be quite simple to find an investor in one of your friends or relatives, since
these people have known you for a long time and believe in you. The most consistent and
passionate support usually comes from a close circle of friends. Just remember that,
using this channel of help, you need to separate personal and professional
communication. To do this, record all the conditions and be sure to voice the possible
risks. Make sure that people close to you understand they can lose their money. Try not
to risk the loss of loved ones or friends due to investments.
Don’t be disappointed if you don’t receive interesting offers from investors or if you are
flatly refused, even several times in a row. All this simply means that you haven’t yet
found an investor who fully complements your goals and needs. Try again and again until you
find your ideal match.
“An offering memorandum is a legal document that states the objectives, risks and terms of an
investment involved with a private placement.” Find out more details
here.
How to present your offering memorandum to the investor you’ll discover below.
Why Does Your Startup Need a Pitch Deck?
Your main goal is to start a conversation. Your pitch deck is designed to evoke curiosity,
attract the attention of investors and let them know more about you.
The key to doing this is to give the potential investors enough detail to enrich their
vision, turning it into something tangible, rather than overwhelm them with data.
Deck Requirements
Your pitch must meet the following requirements:
- Be able to stand on its own. Although you don’t want to include ideas and numbers
that are not relevant to the present, these should be at the heart of your business.
You should not remove the appendices and other resources to convey what the investor
wants to hear.
- Concise. Investors are very busy. Keep it to between 10 and 13 slides.
- Accurate. If estimates are made (market size, customer demand, estimated management
costs, etc.), they should be conservative. If you expand the numbers, it will be
somewhat strange when those numbers don’t match up.
Mind the Timing
Keeping within the allotted time frame can be very difficult. Regardless of the format, be
it 7, 5, 3, or even 2 minutes, you will need to train so as not to go beyond it. Seven
minutes may seem like a lot, but even with such a generous restriction it is extremely
difficult to match the time frames. Try with a timer. If this is your first time, you may
miss by 2 minutes. To prevent this error, you should run a presentation with a stopwatch
many times on your own, honestly pronouncing every word out loud. The actual presentation
takes more time than the training version, so you need to fit with a margin.
Outlining the project in 3-5 minutes is more difficult than it seems. And the most important
thing is often at the end.
Keep Theses Simple
Don’t overload the presentation. People (and especially investors) are often prone to
attention deficit disorder. No one can (and most importantly, doesn’t want to) focus on
complex structures. The presentation should consist of simple theses. As you read long texts
only in exceptional cases, people listen carefully only when they know in advance that there
will be something interesting.
You have no time to evoke their interest, so keep it simple. What, who, why, how much.
Question - answer, thesis - the second - the third. The presentation should be simple and
clear.
Don't Read from Slides
There is nothing sadder than reading from a slide. Everything is already written there and
your audience will read it. When reading from a slide, you aren’t looking at audience and
will likely stray from the story line, speak monotonously and without passion and forget
what else was on that slide.
The slide and the story should complement each other. The text on the slide is there to
allow you to look at it for a second, remember what the slide is about and talk about it
without looking.
A slide helps listeners to cling to the context if they’ve become distracted and are just
refocusing their attention again. Pictures, numbers – yes. But the text is not for you.
Don’t Make People Read
Nobody reads your slides. People look at pictures, but nobody reads texts if they are longer
than three words or more than a few lines on the slide. Presentation slides should be much
more concise than the story, otherwise you can throw them out. A few very short statements
in large print. No literary bundles. Otherwise, there is no chance of anyone reading what
you’ve written.
If you want to make them believe in your product, show them something real. An interactive
prototype is a strong argument to attract the attention of the audience and demonstrate what
your app is about. If you can share the first working model of the application (MVP), it
dramatically increases the chances of winning the game.
Talk to people in the room
You know what your own product is and why it’s great, but they don’t. The most basic and
unexpected things can be incomprehensible. An app for helping snowboarders is a guide to the
slopes, or a guide to injury medicine, or an evacuation helicopter call button. Or does it
help you communicate with friends, or an online store ... what is it? If the main leisure
activity among the audience is not snowboarding but poker, you must explain very clearly all
the basic fundamentals of the project, from scratch. In 3 minutes, of course. Focus more on
what is interesting to a specific audience.
Investors don’t need your detailed list of features – they need monetisation, market
estimation, promotion strategy and development plans, as well as a clear understanding of
why someone will use it.
What is an Information Memorandum?
The information memorandum (IM), sometimes referred to as the offering memorandum, is a
legal document provided by the company to potential investors to explain the objectives,
risks and investment conditions around the funding round.
- This includes management biographies, financial statements, company details and more
to help investors learn more about future business and financial plans.
- This is a short document with about 20 to 30 pages highlighting the most important
aspects and opportunities offered by your investment.
When creating an IM, consider how investors will read it. They should be able to scan
content pages and go immediately to the sections, subsections and even paragraphs that
contain answers to their questions.
Simplicity is the Key to the Professional Offering Memorandum
Take a look at the advanced stages of development and define where you are right now:
- Letter from the Director
- Investment Highlights
- Executive summary
- Company history
- Expansion plan
- Market overview
- Key success indicators
- Risks
- Team (management team)
- Financial information
- Financial Requirements / Quotation
- Ambitions (long-term goals)
- Other information
All this may take a few weeks to work. But no matter what stage you’re at, it takes a lot of
time to raise investment funds.
Prepare investment promotion and investment memos, answer investor questions and demands and
prepare yourself for the countless obstacles of time and energy-consuming activities.
