Factors that will affect start-up funding
Securing the first round of funding is an unnerving process for start-ups. The founders have to get their product or service and boil it down to Rupee’s and Paisa’s for investors whose main worry would be about how quickly they will get their money back.
The usual ways for funding are seed, bootstrapping, grants, friends and family and angel funding. It is not a new statistic that a very few percentage of start-ups get VC money. In fact, generally start-ups do not get VC money.
The number stand at about one percent of start-ups in the US and it is around the same in India. If the person is a serial entrepreneur and has an idea with cutting edge technology where the initial investment is very high, that is when the VC checks in.
So, how can you make your start-up stand out and get funding? Here are the factors people look at before doling out the money.
The core idea of the start-up always becomes an important factor. This is what will be responsible for the success or failure. For example, if your idea is the same as a Google or a Facebook, chances are that you will not find any backers as you are entering a tricky market with established players.
However, if your idea is something new and targeting people who have not been targeted before, automatically the uniqueness of it stands out. You are solving a problem. Along with the idea, you should have a business plan that is clear and structured. It must cover all the elements of your business idea in order to get funded.
By team, I mean both leaders and executers. Leadership is imperative in start-ups as this is where the decisions are made and visions set. At the same time, great things cannot be done alone. The successful running of a business is dependent on the team who executes it.
Even the best of plans can become a failure if you have the wrong team. When you are looking for funding, it is important to project your team as solid. The more adaptable that team, the better the success rate.
Early traction refers to your early set of users. These early adopters of your service or buyers of your product are vital. The reason is that although you are not yet established, they became your customers. That means that they saw some value in your product. What you have solves a problem, so you automatically become a solution for it.
They will also help in bringing more customers and will be the loyal lot if you do things right. Now, if you can show these customers, securing funding becomes that much easier.
Backing by good advisors
Start-up advisors are the people who will support you to run your venture successfully. Choosing the right advisors mean that you can substantially improve the way you function. Your goals can be achieved faster with the immense experience that these people bring in.
They can also introduce you to the right people and help you with their timely advice. If you get the right advisors, their coaching abilities, passion, industry knowledge, and other skills will bring great insights to your business. Having those means that you are on the right track and this is also a key factor in funding.