Wouldn’t your life be a whole lot easier if there was a formula to help your startup receive funding? Of course it would be. But, as Ringo Starr once proclaimed, “it don’t come easy.”
Then again, isn’t that part of the startup journey? If receiving funding was so easy, everyone would be doing this crazy-startup thing. It’s what separates the heroes from the zeroes. And once victorious, it feels like the greatest accomplishment in your life.
So while there isn’t just one formula in place, I can at least provide you with these 7 steps to get that oh-so-important funding for your startup.
1. Have a Plan of Attack
A major myth that needs to be debunked is that a business plan automatically grants you financing. In reality, a business plan is needed to explain to investors what your business does along with market information (audience, projected growth), financial metrics (budget, revenue) and a product launch date. You business doesn’t always have to be a formal document either. It could just be verbally explained to investors. Regardless of how you present your business plan, it’s a crucial step in getting funding for your startup.
2. Do Your Homework
How much money do you need to get started? Startup expert John Rampton advises startups to “Try to calculate your expenses prior to seeking funding. Investors are going to be looking for this information as well. They’ll need to know how much money it will take to get your startup off the ground. This includes everything from office equipment to insurance to legal counseling to product testing. Once you’ve identified the cost it will take to get this ball rolling, you realize that you have enough in savings or could simply ask friends and family members.” Bplans has a neat article that can get you started on this.
3. Start Searching For Money
Let’s say that it’s going to take a lot of money to get your startup going. Where can you start to look? Here are some of the common places that lend money or invest in startups:
- Venture Capitalist – This is a business that will invest money based on a risk/return ratio. You can look for VC’s through either Pratt’s Guide to Venture Capital Sources or The Western Association of Venture Capitalists.
- Angel Investors – Typically an affluent individual who will provide capital for a start-up in exchange for a convertible debt or ownership equity. You can find Angel Investors on the Gust Angel Network or AngelList.
- Commercial Lenders – These are banks. And they are the most likely to invest in a small business.
- The Small Business Administration – A government program that works with certified lenders.
Sometimes the best way to receive funding is by good, old fashioned networking. Sign-up on LinkedIn and start interacting with the world’s largest professional network. You could also look-into seed accelerators. They offer a number of programs besides investing in your startup, like mentorships. Here’s a list to get you started. Finally, consider co-working spaces. Besides saving some money, since you’ll be sharing an office space, you’ll have the chance to mingle with a lot of people who have money to invest or know of trusted investors.
5. Be Prepared
Prior to asking for funding, you’re going to have to argue your case in probably a number of meetings. Don’t get flustered and blow this golden opportunity. Know your facts from front to back. For example, here’s what you need to prep for:
- Describe your goals in a clear, concise and efficient manner.
- Know the people that you’re sitting across from.
- Have questions prepared.
- Practice as much as possible.
- Make a great first impression – for example dress to impress.
6. Have The Ultimate Pitch Deck
Here’s where you’re really making your case for funding. This document should include information like:
- Market Opportunity
- The Problem
- Revenue Model
- Marketing/Growth Strategy
- Management Team
- Asking for Investment
During your pitch, make sure that you tailor it to your investors, update frequently and tell your story, not just a bunch of facts or stats. Forbes put together a handy guide on this topic. Also, here are a few tips to help you refine that pitch deck.
7. Be Persistent
Of course you don’t want to nag your potential investors. But you absolutely need to follow-up. Checking in every now and then until you get an answer shows that you’re serious about your startup. And, even if you’re denied, you can ask you your weren’t funded. Remember, learning from our mistakes is one of the best ways to find eventual success.