By Edward Balassanian
Raising funds for your startup can be a challenging task, especially during an economic downturn or in a fickle market. However, if you are determined to secure the funds needed to take your startup to the next level, here are 10 fundraising tips to keep in mind as you seek out the perfect investors for your startup.
How to raise funds in a fickle market
1. Stick to your guns
Venture capitalists want to see that you are confident in your business model, and this can be demonstrated by not wavering or compromising your vision just to appease them. Show them that you are committed to your beliefs and ideas, even under pressure. VCs are more likely to be interested in supporting a leader who has a clear and well-defined plan, rather than one who is willing to change direction or deviate from their original goal in order to meet the demands of an investor who more often than not knows less about your business than you do. Remain focused on the vision of your startup and always be ready to prove you can articulate the value of your business.
2. Focus on partners who will invest in you for the long term
FOMO investors may be more interested in taking advantage of hype, market downturns, or other temporary fluctuations in order to turn a profit, rather than supporting you for the long-term success of your startup.
Prioritize seeking funding from investors who are interested in supporting the growth and development of you and your business over the long term, rather than just looking for opportunities to invest in a fad. This decision matters because long-term investors may be more likely to provide the financial support and strategic guidance that your business needs in order to thrive in the years to come.
3. Show that you will be profitable
If you are pre-revenue, be prepared to show how you can become revenue positive and what the investment will do to accelerate the process. Investors want to see that you have a solid plan for how your business can be profitable, especially if it hasn’t been profitable yet. Create a solid presentation that shows how you can generate revenue, clearly explaining how an investor’s money can help your startup become revenue positive; provide concrete evidence to support your plan.
4. A great time to raise money is when you’re cash rich
If your startup is in a good financial position—specifically, if it has a significant amount of cash on hand during a period of market instability, it may be a good time to raise funds. Investors may be more willing to invest in a stable business with a strong business model that is surviving economic challenges. Raising funds during downturns and having cash on hand also presents countless opportunities, such as hiring for less, finding service agencies easier, and even negotiating lower rent.
5. Even in downturns, there is usually dry powder in funds
It may be tempting to assume that investors will pull back during difficult economic times and not looking to invest, but often the opposite is true. Most VCs have to return their capital to limited partners (LPs) if they don’t invest. So even in downturns they have to put the capital to work, presenting funding opportunities to startups that are proactive and creative in their approach to fundraising. Put your entrepreneurial grit to good use because money will be invested in good businesses. Don’t worry about valuation as much as keeping your vision alive.
6. “No” is another way to prove yourself
When you receive the dreaded “no” from a potential investor, it doesn’t mean that the door is forever closed. This actually could be an opportunity for you to prove to the investor why your startup is worth investing in. You can reevaluate your pitch, ask for feedback, and directly inquire about what they are looking for in a potential investment so you can find ways to demonstrate the value of your business.
At the same time, don’t waste time with tire kickers. Although you shouldn’t give up, you don’t want to be wasting your time with investors who aren’t seriously considering investing in your business. In the end, you want to find the right partners who are genuinely interested in supporting your vision and truly believe in your startup.
7. Tread carefully when borrowing money
Borrowing money may seem like the easiest way to secure funding; however, it can be extremely risky, and even detrimental, for new startups, especially in today’s high-interest rate market. Venture lenders sometimes have rigorous repayment policies and likely don’t have a long-term interest in the success of your business. They may be more focused on obtaining immediate returns for their investment, rather than supporting the growth and development of your startup over time.
Also, be mindful that fad investors will sometimes come along who promise to make funding easy and quick. There is no such thing. Good money invests in good businesses and the vetting process is not fast or easy.
8. Take more time than you think you need
It is important not to wait until you’re in a financial crisis to seek funding. You should start looking for investors before you need them. It can take much longer than you think to secure funding, and during fickle markets, it may even take twice as long.
You should always be fundraising. It’s critical to focus on maintaining relationships, keeping VCs warm, and staying abreast of the investment narratives in your space. You never want to “cold start” a fundraising process.
9. Be relentless
Leading and running a startup is always stressful, and fundraising can add to the pressure. Don’t let the pursuit of finding funding negatively impact your state of mind. Maintain a healthy perspective on the inevitable challenges you will face, and never “freak out.” Freaking out makes you look desperate and investors can smell that a mile away. Investors don’t want to invest in sinking ships; they want to invest in winners. Carry yourself like a winner even if the outcome seems bleak.
10. Always be honest
It is vital that you are honest with your team throughout the entire fundraising process. Don’t pretend that everything is rosy only to have to tell them later funding has run out on the eve of missing payroll. When a team feels respected enough to be involved in the process, they will have your back more often than not.
Navigating the fundraising process
Raising funds for your startup can be extremely challenging. The key is to stay laser focused on your goals, be persistent, and never be afraid to ask for help if you need it.
With the right strategies and mindset, you can successfully navigate the fundraising process and secure the funds your business needs to thrive.
About the Author
Post by: Edward Balassanian
With more than 25 years of experience in the technology industry, Edward Balassanian has founded and funded numerous startups, ranging from operating systems to consumer packaged goods. He most recently founded Aimi, a new music platform which allows fans to enjoy immersive listening experiences, while providing artists a new medium to create and monetize AI-powered music. Prior to Aimi, Edward founded multiple startups, including BeComm Corporation, a pioneer in building operating systems for digital devices; Be Labs, an IP centric incubator; Vital Juice, a food manufacturing company; and Strings Inc., a content publishing platform. He is the named inventor on over 80 patents in technologies ranging from gesture interfaces, networking, distributed processing, and digital music synthesis.
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