Every business starts out as an idea. When that idea takes shape with a feasible business plan, the focus will shift to the turning point of every startup venture: getting it funded.
It doesn’t matter how great you think your idea is or if the projections support a highly- profitable venture. If you cannot secure the necessary funding, your startup will remain an idea.
Your immediate challenge is to sell your idea to prospective financiers or investors. It will not be an easy task because financiers and investors view business ventures from a different filter. They are emotionally detached from your idea and look only to profit from the investment.
Thus, before we discuss the different ways to get your startup founded, you have to make sure that your business plan will sell the idea to the prospective financiers and investors. Assuming you are building a software app and need funding, here are five steps to a better pitch to financiers and investors:
- Make sure your business plan presents the value proposition very clearly. It has to highlight the main feature of your product or service. The main feature must accurately validate the purpose of your business.
- Create a mock-up of the main feature and have it recreated in Photoshop or any other program that will visually present how the product or service functions.
- Beta test the prototype in social media and your website. The purpose is to gain as much traction on your product and service through engagement. Solicit comments and advice from prospective end users. Filter out the advice and apply those that make sense on your product. Implement the revisions on your prototype.
- Build a fully functional prototype then test it with a sample size of 100 to 200 end- users. There are no negative and positive comments. Use every comment to improve the prototype.
- Go to social media and promote the mock-up. Try to get more than 10,000 likes and shares on your product.
Before you present to financiers and investors, make sure the business plan has been revised to reflect the changes on your product or service. Keep in mind that even with the beta testing, the version of the prototype presented to the founders is not in its final form.
Here 10 ways to find investors for your startup:
- Boot Strapping
This is the process of starting a business without external capital. An entrepreneur will attempt to fund a startup using personal savings, present sources of income then maintain it by managing revenues generated by the business.
- Startup Launch Platforms
There are companies such as startups.com that provide budding entrepreneurs with all the necessary information to launch their business and connect them with potential investors. It already has 13.9 million subscribers to its service, which makes it the largest startup funding platform today.
- Angel Networks
These are communities that could invest in your business or connect you with their wide network of contacts. Angel networks also provide startup advice and mentorship for entrepreneurs. You can find your angel investor in funded.com, Angel Capital Association or Angel Investment Network.
- Crowdfunding sites
There are many types of investors who frequent crowdfunding sites. These sites are open to the general public, philanthropists and experienced investors. Thus, there are a variety of funding sources available. Crowdfunding sites such as Kickstarter, Indiegogo and RocketHub have helped several startup businesses get off the ground.
- Incubators and Accelerators
These are investors who plan to take on a larger role in your business because they want to see it grow. They will often open up a wide variety of resources for you to use on the business and are usually part of a larger investment fund company. Popular startup incubators, accelerators and investment fund companies include 500 Start Ups, TechStars, Vinta and YCombinator.
- Social Networks
Popular professional social networks like LinkedIn are used by startups to generate interest for their ideas and entice investors. Other professional social networks that can connect you with potential investors are EFactor, Xing, Plaxo and StartUpNation.
- Private Equity Companies
These are companies with large resources to invest. Their objective is to pull out the investment after a few years, assuming it generates a huge profit. Although approaching private equity firms has been the conventional route in getting funding, it is generally more challenging to secure approval from them.
- Online Lending Platforms
These are third-party lending sources that have answered the call of businesses that cannot secure a loan from the banking system because of tighter restrictions and qualifications.
The restrictions and qualifying processes of these online lending platforms are less cumbersome, but the rate charged on the lending term is higher. Before you decide to go this route, closely review your cash flow projections.
- Small Business Agencies
Government will always find ways to support small businesses. After all, 98 percent of all businesses registered worldwide are defined as “small.” Small business agencies offer business loans with very affordable lending rates. Their interest is not to profit from your business. Small business agencies want to get your business launched so it can grow and contribute to the economy.
- Friends and Family
Of course, you should be able to fall back on family and friends. It is easier to qualify who among your friends and relatives you can approach for capital funding. Some may prefer a role similar to an Incubator while some may choose just to lend and charge interest.
Regardless, be mindful that bringing personal relationships into business exposes a history of friendship and family ties at great risk.
The hardest part in any venture is starting it. The pre-operating stage in a startup business is often the longest and arduous period. It is where you will experience your idea take shape and form into a concept that could appear viable or vulnerable to potential investors.
The key is to prepare well and closely scrutinize the business plan before meeting with potential investors and financiers. The pitch is crucial; there should be no reason for them to forgo this opportunity.