Mistakes to Avoid on Your First Fundraising Effort
The New Year is here and you may be finalizing the plan for your latest idea and the business you hope to build around it. One of the first and most difficult steps is obviously fundraising.
It’s hard enough to get people interested in your idea. Convincing them to invest money is another matter entirely.
Many startups on the rise make a few key mistakes in this arena when they’re just getting started. That’s no surprise, but if you’re looking to skip that uncomfortable trial and error step, here are some of the most common mistakes that are made and what you can do to combat every single one of them.
Who to Target
Naive owners try to go too big, too fast. That means venture capital and that means a very low success rate. VCs are looking for stability and some kind of traction they can build on. If you don’t have that, they just won’t be interested even if you have some kind of connection to work with.
Even angel investors are not the right place to start. The best way to go about this is to work with people you know or businesses you have some kind of relationship with that are in the middle of their own Seed or Series A effort. They know who to talk to so talk to them and find out.
If you can afford it, you should also be spreading your reach as much as possible. It’s easy to focus on those few investors in your area, but that can really limit your scope. That means hitting the big markets (Silicon Valley, New York, etc.) If you know who to talk to then there’s no risk going that far.
How to Sell
Your ability to convince and to sell your idea will always be the most important piece of any fundraising effort. Don’t be too quick to talk about investing. That’s always the first step to avoid.
Put all your emphasis on exactly what you’re there to show off and if they show interest then it’s time to take the next step. If you have legitimate demand that is the time to position yourself. Bluffing just isn’t worth it.
Forward the most important pieces of your business and be very clear about why they are so good. That means selling the value of your product, your traction, your market, and your team above all. Before you even think about investing, make sure you are strong in these areas and that you know how to communicate that.
Investors want to see the problem and they want to see that you and your team are the right people to solve that problem. Don’t bog them down with product details in your pitch deck because that simply isn’t the only point of interest.
There’s so much more that goes into a good business than a product and investors know that. Make sure they know that about your business.
What to Ask For
Too many startups put together a good pitch, but don’t know what it’s reasonable to ask for. Start small and talk smaller. Investors don’t want to put their own money into something they can’t believe will be fully funded.
This isn’t a race to the finish line. Take it slow, show the interest you have cultivated and you will grow steadily.
If you start in the right place, assume the right strategy, and avoid the mistakes outlined then you should be in much better shape.