5 Mistakes to Avoid while Fundraising for your Startup

Fundraising Promote Your Startup Business

Starting a business of your own is not just a costly affair but also equally tasking — unless you do fundraising. There are zillions of tasks that need attention and a zillion more that you didn’t think would come up. For all this commotion to settle down smoothly, you need revenues to survive as a startup. All business operation, however small or big, have an expense added to it. Unless you are rich one funds yourself, you have to raise a good amount of capital to stay afloat. You certainly can’t just shoot emails asking capitalists to invest their money in you. You and I both wish it were that easy, but sadly it isn’t!

You started your business with your business plan and ideas because you believe in it and see the potential. However, this vision of yours is not necessarily out in the open. You are required to find investors and convince them into believing in the same. Only then they will see the potential in your business and decide to invest money in it. Navigating through this plot of fundraising, aint no bed of roses. One wrong step and it all blows upon your face. This wouldn’t just stop at spoiling your reputation but also a major opportunity for investments. This is why it’s very important to know what you are doing and planning it well before you execute it before the investors.

To make things worse, the seed funding market is nearly collapsing. Venture capitalists today, are investing money into startups at a later stage to avoid risks. This certainly, makes startup owners to be on their toes. The good news, however, is it’s possible to learn from mistakes done by peers and make sure not to repeat it while fundraising for your start-up.

Ask yourself these very relevant questions before you move on to the mistakes you should avoid while fundraising-

  1. Have you done your research about your investors?
  2. Are you aware of the financials of your investors?
  3. Is your business’s legal corporation ready?
  4. Are you thinking just that amazing pitch you made would get you funds?
  5. Have you done your cash flow analysis?
  6. Are you fundraising during slow months?
  7. Are you networking enough?
  8. Have you set your valuation too high?

Here are 5 mistakes startup owners should avoid while fundraising.

#1 You are asking for too much fund- It is very alluring to share details of your million-dollar business. However, you need to also see the higher bar you set for the growth numbers you need to hit subsequently. It will be difficult for you to get the next round of funding if you do not stand up to those numbers you set in the first place. Setting your bar too high early in your career will not only make it hard for your operations but also reduce your chances of getting further funds. Keep your numbers realistic and take it slow.

Allow a simple valuation to be done. Sites such as equitest.net can help you check your valuation online and easily.

#2 You are asking for this money too early on your journey-

Having the money to run existing operations and expanding into newer ones, seems like an obvious step. However, you should also be able to gauge the new amount of commitment that the investor requires once he funds you. Though rarely, startup owners also choose to back out from an idea once they see more prospects in another profitable idea. You will have to stick to the agreed idea, once someone has invested in it. This is why it’s wise to think it through before you go out looking for investments.

#3 You have failed to see the size of your market- The investor won’t invest money in something that is not profitable, it is as simple as that. Investors are looking at million dollars’ markets and more internationally. It is wise to do the calculations yourself before you try to convince VCs of your compelling market size. Bottom-up and top-down analysis are the 2 most common ways of building a market-sizing analysis. While the former is more realistic and complicated, the latter is easier to calculate. Both the approaches are equally good and impress the investors when done right. Because the investor needs to see the chances of your business succeeding.  

#4 You are simply not prepared for your investors- Doing your basic research and groundwork for your investors will enable you to know you fit in. Chances of you getting the funding from them increases when you can explain how you can fit in into their portfolio. It pays off when you are punctual and responsive. Investors wouldn’t want to wait and respond to their queries fast. You must have prepared your team and a great pitch, but you also need to read the room and tone with investors. Understanding the tone and saying the right thing while making use of the opportunity is a tricky yet important part of such sessions. These are all very basic but mostly ignored aspects that screw up equations of investors and fundraisers.

#5 You have taken your team-dynamics for granted- Think of this from the investor’s point of view. He is interested to invest or work with a group of like-minded people working for a common goal. Even though it’s important to have a strong leader, the understanding or dynamics within the team plays a big role. Investors are looking forward to seeing a group where people know their responsibilities. And there should be one person articulating and leading the whole tribe. Chances are the investor would want to see the team from the very beginning and not give you a chance to assemble. Seeing a screwed team dynamic at this stage can become a big red flag for your funding dreams.

All these points apart it’s smart to focus more on the “I have” instead of “I will” in your conversations. It works well for investors who want to see how genuine you are to your own words.

Author Bio:

Swaraj Das Mohanty is a Content Marketer at PagePotato. Being a graduate in Journalism from Bangalore University and an ex-Radio Jockey, he helps brands put their best content up front. Beyond work, he is a bookworm who knows to cook & drive in search of lip-smacking street food. Follow him on Instagram at BoredBelly.

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