To help entrepreneurs overcome the hurdle of securing funding for their startups, we sought advice from 15 industry professionals, including founders and CEOs. They shared their top strategies, ranging from cultivating strategic industry networks to leveraging crowdfunding from loyal customers.
Dive into these insightful tips to navigate your funding journey successfully.
Cultivate a Strategic Industry Network
One effective strategy I’ve honed as an entrepreneur facing funding challenges is to cultivate a focused and strategic network within my industry. Rather than just attending general networking events, I seek out niche gatherings and industry-specific conferences. By genuinely engaging with others and showing interest in their ventures, I build authentic relationships that extend beyond the sole aim of securing funding.
Establishing trust and credibility within my industry has not only attracted potential investors but also opened doors to partnerships and mentorship. These connections often lead to introductions to investors who are more willing to invest in someone deeply embedded in the field. In my experience, this strategy has not only helped secure funding but has also provided valuable insights and advice.
Focus on a Specific Client Pool
Your product or service should solve a real problem. Don’t focus on the entire market; focus on a sub-category from your possible client pool and become the best solution for them to solve the aforementioned problem.
We have successfully secured funding for our startup by creating a very straightforward product and targeting a very focused group. This allows us to understand exactly what our clients’ struggles are and develop the best solution for them.
With Small Business Digital Ready, you gain access to free events hosted by industry experts. Plus, get opportunities to network with peers in your area.
Leverage Networking for Funding
During the initial stages of Money Under 30, I played an instrumental role in securing crucial funding for our budding enterprise. This pivotal financial support not only helped us establish a strong foundation, but also set us on the path to sustainable growth and success. Here’s how we did it:
When we were having difficulty securing funding for our startup, one strategy that proved invaluable was networking. We actively participated in industry events, became members of pertinent professional organizations, and utilized social media and online platforms to connect with fellow entrepreneurs and potential investors. This network not only offered us access to valuable resources, but also provided a treasure trove of advice and potential funding avenues.
Consider Venture Capital Funding
Securing funding for a startup can be achieved by connecting with like-minded industry professionals, especially if business loans aren’t an option.
Venture capital is money received from investors in exchange for a chunk of business ownership. The percentage of investor ownership is, of course, up to them. Even though the idea of giving some of the business to an investor may not be appealing, venture capital is a good option for those looking to be debt-free in the fiscal sense.
Venture capital funding helped a company in the home appliance industry get started. There was no shortage of industry professionals. The company connected with a larger company, gave them a great pitch, and offered a portion of company equity; then they were off.
Both companies have grown because of this partnership, so it’s safe to say it’s been mutually beneficial. If this sounds like the boost needed for a business, start chatting with other businesses.
Start a Podcast to Connect Investors
This recommendation stems from my own personal experience with my company. Starting a podcast series, where you invite successful investors or entrepreneurs to share their insights and experiences, is mutually beneficial for both you and them. This not only positions you as a connector within the startup ecosystem but also provides an opportunity to build relationships with potential investors who may be interested in your venture.
At TekRevol, we have our signature podcast: “Technology for a Change,” for entrepreneurs who are seeking to make a difference. Through the podcast, I have been able to connect with several like-minded individuals with whom I was eventually able to form a partnership.
Join Pitch Competitions
Join pitch competitions to secure funding for your startup. Prepare a business pitch that covers the eight essential parts of a great pitch deck: purpose, market size and analysis, competition, product, business model, team, financials, and appendix.
Practice your presentation skills, too, since selling yourself is a big component of selling your idea to investors. Be on the lookout for these opportunities in your localities or even online. Submit your pitch to as many competitions as you can for more chances of winning.
Embrace Market Validation and Lean-Startup Principles
One effective strategy for entrepreneurs facing challenges in securing funding for their startup is to focus on validation and lean-startup principles.
Conducting thorough market research is essential. Before even thinking about seeking external funding, aspiring entrepreneurs should ensure there is a genuine demand for their product or service. Identifying a specific problem or need in the market that your startup can address is key. This not only validates your business idea but also demonstrates to potential investors that there is a real market opportunity.
Furthermore, when starting out with limited funds, it’s wise to begin with a business model that doesn’t require a substantial amount of capital upfront. Embracing lean-startup principles, which emphasize minimizing waste and maximizing efficiency, can help achieve this.
Use Customer Success Stories
One often-overlooked strategy in securing startup funding is to use your customer success stories to attract investors.
First, gather testimonials and case studies that showcase the unique value your product delivers. Second, weave these stories into your pitch deck, customizing the narrative for each investor’s specific interests. Finally, highlight these customer success stories during investor meetings as evidence of your market fit and execution skills.
Contrary to popular belief that investors are only interested in numbers, a strong customer narrative can significantly tilt the investment decision in your favor. It provides a tangible, emotional connection that numbers alone cannot achieve.
Roy Lam, CEO and Founder
Hire an Industry-Experienced Business Coach
Consider hiring a business coach with industry experience if you’re struggling to secure funding. Having a coach who knows the ropes can make a world of difference. Fundraising can be a daunting process, and having someone who’s been there and done that can save you time and stress.
One of the big challenges entrepreneurs face is juggling the fundraising efforts while running their business. A coach can help you manage that load. They’ll guide you through the fundraising process, helping you tailor your pitch and connect with the right investors. Plus, they can be a valuable asset even after you’ve secured funding, assisting with executing your business plan and handling the ups and downs of growth.
Build Long-Term Investor Relationships
Understanding the challenges of securing funding as a fellow startup founder, one strategy that worked well was focusing on building relationships with investors over time, rather than just pitching them once.
In 10+ years of experience, taking a genuine interest in potential investors and adding value for them first has been key. Sharing articles, data, or connections that might be helpful, expecting nothing in return, is a good practice.
This approach establishes trust and credibility over time. When the startup was finally pitched, several investors were eager to have a stake because they believed in the entrepreneur. They saw a partner, not just another founder chasing capital.
The advice is to network and build connections with investors long before needing money. Offering to advise their portfolio companies, discussing trends, or grabbing coffee can be beneficial.
Show Personal Motivation and Passion
Be human and show your motivation to succeed. Investors often want to see more than just numbers and business plans; they want to connect with the entrepreneur. Share your passion, your personal journey, and the “why” behind your startup. Demonstrating your unwavering commitment and determination to succeed can resonate deeply with potential investors. It’s not just about the business; it’s about you as a driven and dedicated individual. This human element can be a compelling factor in securing funding.
Besides showcasing your humanity and motivation, it’s essential to be prepared with a well-thought-out business plan and consider a range of funding sources, including family-run investing firms. These combined strategies can help entrepreneurs build trust and secure the financial support needed for their startups.
Understand and Sell Product Value
As a co-founder who raised over $5 million for his startup ($5.2M over six rounds, to be exact), one strategy that really worked for us is worth sharing. Our go-to strategy was truly understanding the value of our product and knowing how to sell it to the investors.
Now, when it comes to investors, “value” is a relative term, so you need the numbers to back it up. We used market value, competitor analysis, and customer feedback to understand and define our value, and we spent months learning how to showcase it and highlight the potential growth of our SaaS.
Develop a Minimum Viable Product
Every founder should ask, “Would I invest my own money in this?” Your conviction should be clear. If it’s a resounding yes, consider accumulating enough funds to develop a minimum viable product (MVP).
With my past experience, I’ve seen that showcasing an MVP effectively highlights the potential ROI and reach of your startup. Turn those figures into a compelling pitch deck. Investors typically aren’t drawn to just “interesting ideas”—they’re looking for a tangible opportunity to grow their investment.
Create a Self-Funding Business Plan
Having started a few businesses, including one capital-intensive one, I have some pretty strong feelings about where a new business owner should and shouldn’t pursue funding. Loans have a place in business. Vehicle or equipment loans, especially, are, to me, considered “good” debt.
But outside of a loan for an asset, starting your new business should be done with a sound business plan that minimizes the need for cash and utilizes growing profits to fund itself. To make this a reality, certain business types make more sense for your first business investment.
Starting a storage unit facility, for example, is expensive, whereas learning a skilled trade like plumbing and starting your own plumbing service requires more sweat equity than cash. Develop a great business plan that allows your business to grow and self-fund. Because in reality, capital for a new business owner either doesn’t exist or is prohibitively expensive.
Leverage Crowdfunding from Loyal Customers
One of my clients, who owns a cosmetic brand, tried leveraging their existing user base, and it worked exceptionally well. They had a growing base of loyal customers who loved their product. When they decided to seek additional funding to scale up their operations, they reached out to their customers through a crowdfunding campaign.
The response was remarkable; their customers not only invested but also spread the word among their networks. This not only provided the necessary funds but also expanded their customer base. It’s a testament to the power of leveraging your existing customer base, not just for revenue but also for securing the funding needed for growth.