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10 Tips to get funding for your start up

by Rajesh Gotan

Start- up culture is ever than before all over the world and they are real booster of the economy. Therefore start-up funding is a very important element.

But the question is, how many start up are successful? So the answer is that it is a very meagre percentage!

It is a highly risky proposition for the investor and for the start up as well – both are at risk. One with the money in start-up funding, other with the time and the effort. In this article, let us try and understand that what an investor looks for start-up funding. The start- up may also view them as Frequently Asked Questions by the investors and the answer to those become “Tips” for you to get start-up funding.

So let’s try and cover these points in simple language avoiding any type of technicalities or Jargons.

1. The Big Picture

Develop a very short introduction that instantly strikes chord with the investor. In the nutshell, it should communicate why you and your business is worthy of a closer look. Remember that, investors hate fluffy and global talks.

If you are able to get the investor interested at this juncture, it means you have crossed one key milestone.

2. The Problem Being Addressed

Clearly articulate why you are in the business you are in, and how uniquely it benefits your customers. Be specific and refrain from hopping here and there with huge amount of statistics or data.   

3. The Solution

You not only present the solution over here but also state how you will do it better than others. For example, if you are in business of yoga, the yoga as a solution to health problem is already known, therefore you need to articulate how you are different than others like “we not provide yoga classes to the foreign visitors but we also organise cultural shows and circuit tours for them to get idea about our rich heritage”.

“It’s almost always harder to raise capital than you thought it would be, and it alwyas takes longer. So Plan for that.”
Richard Harroch

4. The Market

First clearly define your market, like in above case it’s the foreigners coming to India. And then clearly define the size of opportunity which is in currency or any other directly relatable number. You may also refer to any credible source here – a report or research. Ideally, you must have your own research conducted as well on a good sample size. This is of the importance for the investor to assess the depth of the market and the long term prospects.    

5. The Business Model

Here you need to talk about “how will you conduct your business”. For example, you may want to open up franchisees for your yoga business with just one centre of excellence owned by the company. Talk about the various revenue streams here.  In this case, it can be revenue share with the franchisee, enrolment fee and one time Franchise Fee. At this state, the business model will be evaluated for its viability.

6. The “Unfair Advantage”

Here you need to mention about any distinguished edge that is there in your business. Like a patent, a proprietary technology, any exclusive rights, formulas. Something that is hard to match or an unusually strong and defensible market proposition.

7. The Competition

Never say that there is no competition. That may send a signal to investors that you do not understand your external environment very well. Like to Airplanes, the competition is bullet trains. Explain your competition in a fair manner and then state how are you going to be different (better) than them. Here you must draw the battle cards very well.  

8. Sales and Marketing Plan

Be very specific here. It’s not good enough to say that you are going to reply on word of mouth or your website. Such statements may imply that you do not have any marketing plan. You need to clearly define as to “how will you get your customers” – a very clear sales/distribution plan. Here you need to wear the sales and marketing hat. Without customers, no business can survive. For example, if you are in specialised garments, you need to enlist the on-line market places where you will list them and the over-all digital marketing plan translating to quantifiable numbers.

9. The Team

It’s rightly said, most of the investments are made on people. Present you team very well with the different roles and responsibilities each member will take up. Communicate the demonstrated abilities of the team in the past- A track record of building 2 successful companies. A good plan with a poor team hardly has any chance of success whereas a good team can make a mediocre plan work.

10. Money and Milestones

For the start-up funding, tell the investors.

  • How much money you need
  • How would you spend it
  • What financing you obtained previously and how you spent it
  • Develop three scenario’s – For large, medium and small investment
  • Divide your funds into three buckets:
    1. Funds required for day to day operations with basic infrastructure
    2. Funds needed to get customers for your product or service
    3. The Funds needed to expand your program or business

If you prepare well with the above “Tips”, investors will find very hard to turn down the proposal of you for start-up funding. So get prepared and get funded!

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