Once your startup is investment-ready, the next item on your agenda is to begin the fundraising process. It’s often a challenging process and might yield positive or negative responses depending on the success of the strategy.
Funding is a vital aspect of building a successful startup. It’s often a challenging process and might yield positive or negative responses depending on the success of the strategy. Before proceeding to request funding, your first to-do is to ensure that your startup is investment-ready. Once that is sorted, your fundraising process is ready for kick-off. Below are some of the steps to raise funds easily.
Determine your financing structure
The first phase is to determine what your financing structure will be. There are three major options: Bootstrapping, Equity or Debt. With bootstrapping, you are dependent on funds sourced from your savings or money raised from friends and family that you typically do not have to pay back. Most founders often tend to want to bootstrap for a longer time before searching for an investor so that they can gain enough traction to convince an investor to help them grow on a larger scale.
Equity Financing refers to reliance on investors to finance the business. The investors tend to give their money in return for a percentage of equity in the company. For African startups, a way to raise funds through equity is through SAFEs and convertible notes.
Debt Financing occurs when reliance is on money borrowed through banks, lending institutions, investment organizations and sometimes personal relationship circles.
Select the right investor
It’s important to select the right investor because selecting the wrong investor, especially at the early stage of your startup can cause a long-term negative impact on the growth of the business, profitability and success of the business in the long run. Spend ample time to decide who you want to have a slice of your business and for what in return. The categories of investors you can select from include Venture capitalists, Family & Friends, Incubators & Accelerators, and Angel Investors. In most cases, the stage of your business will help you decide what kind of investors you can pursue and the type of investor you should typically avoid.
Build your pitch deck
Your next point of call is to build your pitch deck. Your deck should typically tell a coherent & consistent story about your startup. Think about it like a work of art, it should be convincing, clear and concise. Upon first glance, anyone should be able to understand who you are, what you are trying to do/what you have done and what you are aiming to achieve. A pitch deck should typically have the following; The problem you have spotted, the solution/product you are proposing or have built, your market size & target consumer/user, your business revenue & operating models, your competitive landscape, your marketing/customer acquisition strategy, your product data & company financials and your funding request amongst others.
Reach out to investors
Once you’ve completed the three stages above, your next step is to reach out to the investors. You can do this via a pitch event, sending email intro, personal introductions etc. Typically you share the pitch deck with them and are invited for a physical or virtual pitch presentation to convince them. Most investors will typically carry out due diligence on the company before proceeding to invite you for a presentation. Some of the questions typically asked/researched are usually around the team's credibility, the viability of the product, the market fit, etc Then after the pitch, they can either show interest by offering you an offer or drop off entirely if uninterested.