If you’re looking to raise venture capital, you must know what your company needs before going into the meeting. You want to be prepared and ready for anything that they ask. It’s also important that you have all of your facts straight so that when someone asks a question or makes an offer, you can respond quickly with an educated answer. The following are ten things to consider when raising financing:
1. A good product
The first thing you want to have is a good product. A great product idea isn’t enough, you’ll need a functional prototype and basic customer validation before you start looking for funding. If your startup’s main asset is an amazing idea without an actual working prototype or proof of market demand, investors may be hesitant to fund your startup until you have proven that your product can take off.
2. The team
At this early stage, investors are not only interested in the idea but also the people behind it. Even if you have a great concept with an impressive prototype or customer validation, potential investors will want to know who’s leading your company and what unique skills they bring to the table. Make sure potential investors can get in touch with you and see your LinkedIn profile, this shows that you’re serious about building a company.
3. The problem
What need does your product or service fulfill? Investors are interested in solving problems that will affect many people. Proving that you have identified a large pain point is key to proving there is a market for your product.
4. The business model
Investors want to know how your company will generate revenue and what kind of Company they can expect in the future. You need to show that you have thought about monetization from day one, be it with subscriptions, ads, or something else entirely. Have a clear plan of how your startup will grow and be prepared to share the financial projections.
5. The competition
Is this a saturated market? Investors want to know that you have done your homework on competitors, potential customers, and the market in general. What makes your company unique? What makes you better than other companies in the industry? Why should people choose you?
6. Market size
Investors are interested to know how big the potential market for your product is, and how quickly it can grow. Show them that there’s an opportunity of at least a few million dollars if not more over the next four or five years. If you’re still developing your idea, explain how you think the market will evolve and how it will change over time.
7. Financial projections
It’s important to show investors that you have thoroughly considered the financial viability of your company from day one. Whether or not your company succeeds, they need to see a clear path to profitability which includes cost analysis as well as step-by-step growth targets over the next four to five years. Create the financial pr projections based on your market research and growth projections.
8. Financial needs
Show that you understand what it takes to build a successful company, how long it will take, and why you need the funds you’re asking for. Make sure that you know exactly what each round of funding is needed for to get your startup off the ground.
9. The timeline
Show investors that you have a realistic plan about how to build your company and the milestones you’ll need to meet along the way to get there. They will also want an estimate of when they can expect to see a return on their investment which is why you must have a clear path for growth and a clear understanding of how your startup will scale.
10. Exit strategy
Investors want to know that, in case they should decide to sell their shares or make an exit, there is a clear way for them to do so. Make sure you have at least one concrete idea of how this might happen two years down the line which includes the valuation of your company.
Conclusion
As you can see, investors are looking for potential, maturity, and clarity. If you’re serious about raising funding for your startup, spend time validating your idea first. Once that’s done you’ll be able to use the above points as guidelines to help you attract financing from investors who will help take your business further.
Fortunately, there are various funding options available to startups, which is why it’s important to explore all your possibilities. If you’re not sure where to start, talk to the experts who can provide you with the right information and guidance.
