All my life I knew that there was all the money you could want out there. All you have to do is go after it. Curtis Carlson
This is what most startups would have found out the hard way, because the challenge is in the go after it. As an entrepreneur it is a given that you will not have the funds readily available. To be able to give shape to your dreams, money is an essential component that cannot be done without. Fundraising, is a critical element of an entrepreneur’s startup journey. Fundraising, I will say is an art, either you have the skills or you don’t have the funds.
Measures are being taken by India’s capital market regulator Securities and Exchange Board of India (SEBI) to encourage the booming startup industry by permitting them to list in India and allowing Indian investors to invest in these companies. This is all very well, however, how do you go about getting the funds to start and then run your business. I am sure you will come across many “incubators” who can hand-hold you through this phase. Some of these companies have been through the fund raising experience when raising funds for themselves. However, it will help to know what is required of you when going about the crucial activity of raising funds.
Broadly speaking, you can say there are three phases that you need to focus on:
*You prepare a solid strategy that will help you determine the objectives and methodology.
*You define and follow a process that will systematically guide you through the activities.
*You create a fantastic pitch that will help convert potential investors.
Strategize to get onto the right track for fund raising. Be very clear on one point, you are trying to sell your idea, your expertise and your company’s capabilities. Identify the investors that you will target and conduct a detailed study of each of them. The investors will, naturally, do a due diligence similarly you too need to do a due diligence of the investors. Find out how these investors can be approached and set up meetings at an early stage to set the ball rolling. Time is of the essence and investors will take their own time to come to a conclusion. In addition, the first few investors may not be interested. So, you will need to start all over again with other investors. Remember that these meetings must be in person where you can shake hands with the investors. Look for and avoid periods when your investors will normally not be available. Have a strong but simple story that portrays a clear picture of your idea. After your first meeting continue with a series of interactions and ensure that you remain visible to the investors. Do not hesitate to use your social networks to reach out and influence the investors. As an entrepreneur, fund raising is not an additional responsibility that you need to take on for a short term when starting your venture. It is one of your critical responsibilities requiring your full attention. Additionally, you will have to phase out the inflow of funds according to certain milestones in your business building journey.
The purpose of a process is to ensure that you do not deviate from the core objectives of fundraising. The process is built around two major activities:
i. Preparation: You will need to build your base to be able to attract investors. One sure-shot way is to show investors what you have got. You begin with setting up your company and completing all the statutory requirements. Show your presence on the web along with a logo and display all brand items. Next is to get your key resources in place. These are the people who will provide the technical and practical support to your campaign. Maintain a database of customers that can be shared with the investor. If possible, develop a prototype that can be showcased to the investor. The importance of the preparation stage is to show the investor that you are a serious entrepreneur and that you mean business.
ii. Investment mapping: Once your preparation is well under way, you begin to spend time on working out your investment requirements. Create a complete roadmap of the what, when and how of your fund requirement. The type of fund (Seed fund or Angel investment or Crowdfunding etc.) that will be required at which stages of your journey. How much is required and the potential investors at each milestone point on the roadmap. The investment mapping stage is basically the homework that you need to do to guarantee an effective approach to the investors.
Your investor “pitch” is perhaps the most significant of the three phases. Your pitch must be simple and easily comprehensible. On the other hand it should be able to attract the investors and make them curious to know more about your project. Simply said, it has to be outstanding. As the presenter, you have to be completely familiar with your pitch. Remember you are selling and this is not a movie shooting where retakes are possible. This is a live performance and a lot rests on your ability to capture and retain the attention of the investors. You must be prepared for any eventuality.
You will come across different perspectives on fund raising shared by people who have been through the grind. It ultimately boils down to you. You are the pivot around which everything revolves. The first question I will ask you is are you convinced about your own idea? If you are convinced yourself and are passionate about it no one can stop you on the path to success.
Faith is taking the first step even when you don’t see the whole staircase. Martin Luther King, Jr.
Do not project that you are raising money as that will put off your targeted investors. You are actually building a dream, so show that perspective.
Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. Ayn Rand
The references I have provided will give you a lot of insights. A must read is the article 10 VCs And Founders Give Their Best Advice For Raising Money (The link to the article is mentioned in the references.)
Take this up as a challenge and enjoy the adventure.
1. ETTelecom.com. Startup fundraising, IPOs a breeze now. 2015.
2. Mark Suster. How to Develop Your Fundraising Strategy. 2012.
3. Kim Bhasin and Vivian Giang. 10 VCs And Founders Give Their Best Advice For Raising Money. 2012.
4. Investor.com. How Fundraising Works.
5. Ricky Pelletier. 4 Steps to Help You Prepare for the Fundraising Process. 2015.
6. First Round. Take Your Fundraising Pitch from Mediocre to Memorable with These Storytelling Tips.
7. Chance Barnett. The Ultimate Pitch Deck to Raise Money for Startups. 2014.
8. Dharmesh Shah. The Pitch Deck We Used To Raise $500,000 For Our Startup. 2013.
9. Madanmohan Rao. The Indian startup ecosystem is blossoming Rajesh Kumar, Tata Elxsi incub@TE. 2015.
10. Pooja Sareen. Exclusive: Chennai-Based Termsheet.Io Which Simplifies Startup Fundraising Process Gets Funded. 2015.