9 Ways Young Entrepreneurs Can Ensure That Their Startups Get Funded
One of the biggest milestones for any startup the acquisition of funding. Apart from the fact that you now have money to play with, you were also able to get someone to believe in your vision so much that he/she was willing to invest in you. It’s refreshingly validating and brings great feels all around. But with the amount of startups seeking funding today, how can you set yourself apart from everyone else? Here are a few tips to help ensure your startup gets funded.
Build a quality team.
You need a quality team that either has awesome backgrounds or specific skill sets that make building your product possible. This not only ensures investors that you’re building something great, but also that they are investing with people who are the real deal. Spend time recruiting great co-founders that complement your abilities and lift the startup as a whole.
Create something that’s actually useful.
Entrepreneurship is very simple if you break it down. If you create something that people need, people will buy into it. That’s what investors look for when they choose companies to invest in. Having this narrow focus of knowing the major problem you’re solving in the world and being the key solution to it will set you apart from all other wantrepreneurs.
Have noticeable traction.
The best way to show proof that your startup has a future is to show traction. What is traction, you ask? Take note of these words from DuckDuckGo founder Gabriel Weinberg:
“Traction is growth. The pursuit of traction is what defines a startup. Traction is the best way to improve your chances of startup success. Technical, market, and team risks are easier to address with traction. Fundraising, hiring, press, partnerships and acquisitions are all easier with traction. In other words, traction trumps everything.”
Network and schmooze.
A key part of being an entrepreneur is having quality relationships. Investors don’t just focus on product itself, but also whether they like working with the people behind it. Before you go all out pitching people, don’t forget to spend time meeting and getting to know people. The more people who know and like you, the more likely people talk well about you, which opens doors to more possibilities.
If you’re an avid viewer of “Shark Tank,” you’ll notice that one of the major reasons why entrepreneurs don’t get a deal is because they are raising money way too early. Having some traction is great, but you need to reach a certain velocity to really start raising eyebrows. This can include a certain number of users relative to the number of sales. While there isn’t really a sweet spot, the general rule of thumb I use is to ask yourself why you need the investment in the first place. If you have a ton of sales and profits and need the money to continue scaling up, that might be a good reason to raise a round; if you still don’t have an MVP (minimum viable product) and need money to build it, then you’re probably ready to even raise a small seed round.
Pitch the right investors.
While you can certainly play the numbers game and just pitch until someone says yes, you’ll have a better rate of return and attract better quality investors if you actually do your research and find people focused on investing in your industry. Your best bet is to pitch investors that have a running history of giving a shit about whatever you’re trying to build.
Be persistent, but don’t be creepy.
Being creative in grabbing attention is one thing, but being creepy and invading privacy is another issue. Make sure you know the difference between the two when pitching investors. Using common sense is usually your best bet. For example, hacking into an angel investor’s phone might not be the best decision based on common sense. To be frank, if you’re spending all your time figuring out creative ways to get responses, I’d question where your priorities are as an entrepreneur.
Don’t try to get funded.
Your goal as an entrepreneur is to build a product that’s useful, disruptive, and solves a prevalent problem in society. Getting funded merely gives you useful resources that help you get there, but don’t become so in love with trying to get a check that you forget why you became an entrepreneur in the first place. In the words of Alibaba founder Jack Ma:
“A lot of entrepreneurs didn’t make it not because they don’t have money, but because they had too much money. Because when you try to solve problems with money, that is when your real problems start. I believe that money could not solve all problems. Money is just an important tactic in problem solving. So, when people say, ‘I have money, so I can do this.’ That is the start of their failure.”
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