The Art of Startup Fundraising: An Entrepreneur’s Guide to Raising Money

You’ve got an amazing idea for a business and you want to see it come to life. You need capital, though, in order to make that happen. Does that mean you have to resort to asking friends and family for money?

No, not at all. The good news is that there are plenty of people who would love to invest in your startup venture. All you need is a bit of knowledge about raising capital for your company and being a bit familiar with the art of startup fundraising.

Selling your equity to investors isn’t as easy as it sounds, especially if you’re looking for the perfect partner who will provide the right amount of capital for your business at the price you’re looking for.

However, raising capital can be a lot easier than many think if you take the right steps from the start. It can be considered as an art like dance moves or drawing within a canvas. The art of startup fundraising can be (and should be) taught and practiced enough times to increase the success chances.

Let this article help you get started on the right path toward securing capital from potential investors interested in investing in your startup venture.

What You Should Know Before You Fundraise

First things first: You should know what you’re looking for. When you’re looking for investors for your company, the first thing you should do is define who the investors are. This way, you can focus your efforts on finding partners that are interested in investing in your company.

Before approaching investors you need to make sure you have a scalable business, you have prepared and tested your Minimum Viable Product (at least to some extent) and have prepared a clear fundraising roadmap.

Moreover setting goals for your startup (what do you need the money for?), understand different types of investors and their logics, and perhaps network with them to learn first-hand their requirements.

Your startup’s short- and long-term goals

The first thing you should do when looking for partners is define the short and long-term goals of your company. The reason for this is that investors are more likely to back your company if they see a future path to profitability and success.

The best investors will be more than happy to help you achieve your business’s goals. That said, if your goals are vague, investors will likely have less of an interest in backing your company.

A good way to create achievable and clear goals is to follow the SMART approach (Specific, Measurable, Achievable, Relevant, and Time-Bound). In fact, the SMART approach can be seen at the heart of the art of startup fundraising since it helps to create concrete milestones for your startup. You can read more about how your goals can be SMART here.

You should have a general idea of what you want your company to become and where you want to take it as a business. This is more of long-term goals (2-5 years) and the vision.

In addition, short-term goals should be defined to show your commitment and how you plan to achieve the long-term goals. Here the SMART framework introduced above can be helpful.

Moreover, such goals should have a good focus on the financial side since investors are particularly interested in financial projections.

These goals will help you define what your company is and who you want to be. It will also help you focus your efforts on finding investors interested in backing your specific business goals.

Yet, the art of startup fundraising is far beyond setting goals and it includes the process and dynamics of investment.

The process: The art of startup fundraising

Next, you should understand the investment process for your company. This is because it will help you better understand the steps involved in finding investors for your company.

The investment process for your company is going to vary depending on the type of investor you’re looking for.

– Private investors: Private investors are generally individuals. These investors are more interested in gaining a return on their investment than seeing the growth of your business. As such, you’ll likely only be able to raise very small amounts of money from a private investor. We explain further about how to approach and convince angel investors (as important private investors) in this article.

– Venture Capitalists: Venture capitalists are very different from private investors. Instead of just looking to see a return on their investment, a venture capitalist will usually be looking to see growth and profits from the company that they are backing. Venture capitalists will typically provide a large amount of funding and expect it to earn a decent return for them.

It is crucial to keep an eye on the following while planning your approach and roadmap: 1) Your fundraising timeline; 2) Your fundraising strategy; 3) Your fundraising targets; 4) Your fundraising milestones; 5) Your fundraising actual progress.

The current state of your startup funding options

Next, you should understand your startup’s current funding options. This will help you understand the various funding sources available to you as a startup.

The reason for this is that the funding options available to you as a startup will help determine the type of investor you are looking to attract. This is important, because the type of investor you are looking to attract will determine how you approach your funding.

Your startup funding options depend on your network and stage of development. If you have a large network of seed money investors and your startup is at early stage i.e., product-market fit, you really need to consider such investors.

If your startup is in later stage and ready to scale, and if you have a decent networks of VCs or private equities, you can consider these types of investors.

However, if there is a mismatch here for example you have a network of private equity and you are still in early stage, the art of startup fundraising would suggest you to invest in networking with seed stage investors within the ecosystem, probably.

How to Find and Approach Investors

Now that you know a bit about your startup’s funding options, you can better help investors understand your company and its potential for growth. The best way to do this, according to the science and art of startup fundraising, is to start by building a relationship with potential investors.

This means reaching out to them, getting to know them, and sharing your story with them. This is the best way to get a potential investor excited about your company.

As you share your story with potential investors, you’ll want to focus on the potential for your company to achieve great things in the future. This is the best way to inspire a potential investor to back your company.

Once you have some potential investors on the radar, you can start reaching out to them to see if they are willing to become partners in your business venture. This means sending them an email or making a phone call to see if they are willing to meet with you to discuss funding your company.

Final Words: How to Reach a Deal with Investors

Once you have a potential investor on the radar, you’ll want to start approaching them and making them an offer. The best way to do this is by creating an investment agreement through an investor’s deck.

Investor’s deck are those decks that you create for your company and investors to help them understand the return on their investment and the risks involved in backing your company. Compared to a pitch deck, investor’s deck is much more complete and with a focus on the financial details and assumptions of your startup.

The best way to create an investment agreement is by using a template. These agreement templates are great because they help you structure your deal and clearly outline the terms and conditions.

This will help ensure that you and your investors are all on the same page when it comes to the deal. Once you have a deal, you’ll send investors updates on the deal, the deal terms and conditions, the deal structure and other terms and conditions of the deal.

You’ll also want to keep them updated on other aspects of your company that they may be interested in.

There are plenty of ways for entrepreneurs to raise money for their companies, and the best way to succeed is by taking the time to research your options and find the best funding option for your business. The tips from this article will help you do just that.