How to raise funds for startups

How to raise funds for startups

At first, there was an idea. Each startup starts from this point. You exclaim: “Eureka!” and start to think about realization. Usually after the euphoria of the idea comes hangover from reality and you need to think about the business model, team, funding, and other complicated things. 

It’s not a secret that each new business needs funds. So, how do startups get funding?

What startup need?

Let’s talk about what startup needs in order to receive investments. What services for startups do you need and what you should do to turn an idea into the real product?

Each founder faces some challenges. The basic underwater rocks for a startup are, as follows:

  • lack of budget;
  • a lot of attention to the product without attention to the customers;
  • lack of technical background;
  • relevance of the idea and continuous changes.

Below we will describe each moment and see how it can affect the fund-raising.

  1. Lack of budget. A very common problem when you want to build a product. Startups usually work with a limited budget and really need investments. You can use different crowdfunding resources like Kickstarter, or try to find one main VC investor. When the demand for your product will increase, the big companies will be more willing to invest in you.
  2. A lot of attention to the product without attention to the customers/end-users. When you fascinated by the idea you might forget about users’ needs. Do they really need your product? Will it be understandable and easy to use? You should take this into account while making a business model.
  3. The relevance of the idea. This is mostly the same as the previous point. Think about the timing and actuality of your product. Does it come at the right time? Are there all the technologies you need or should you wait a few years? Is the product new or outdated and the market full of the analogs? You should answer all these unpleasant questions before making your strategy.
  4. Lack of technical background. Often founders haven’t strong technical skills, this leads to a misunderstanding of product realization. To avoid this challenge you should find a reliable team with the necessary skills for your future project. Maybe, you will need consulting services to make a good strategy and technical task.
  5. Continuous changes. You need to be really flexible and your team does too. The more adaptive you are, the better for your business. The startup world is very versatile. The initial idea can be modified a lot of times till you’ll get a real product. You should understand this and be ready for this.

How you can increase the chances of getting investments?

Considering all we are talking about, how to raise funds for your startup? It will be very good if you show investors the Proof of Concept (PoC) or Minimal Viable Product (MVP). Visual demonstration of plan or product highly increases your chances to raise funds. 

You should be ready to present your product at different conferences, send a lot of emails to investors, try to arrange a personal meeting with investors and be ready for refuses. This is a normal process in the early stages.

If you haven’t got the necessary technical background, hiring experienced specialists will be a great solution. Of course, you need to think about how to fit into the budget, so hiring a lot of specialists could be unreal. In this case, you can hire the whole team at once. There are a lot of great remote dedicated teams who already work with startups and can help you with building a strategy, PoC and MVP. Thus, you don’t need to expand the in-house team and look for a bigger office.

Wrap Up: make dreams come true

The real world can be rough and you should deal with it. You can’t predict all the pitfalls and breakthroughs you’ll face. But you can protect your project from common mistakes. One good Proof of Concept can bring you more investments than many abstract unstructured ideas. One workable MVP can significantly increase the demand for your product. Thus, together with making the plans try to make the realization of your product as fast as you can. This will attract investors more than just schemes on paper.