When you’re looking for funding for your startup, you have to think about a lot of different factors. On top of that, you also have to plan for a variety of scenarios. This can make things seem complicated. However, it doesn’t have to be that difficult.
There are some basic things you can do to get your startup a leg up when it comes to raising capital. And that starts with understanding where your company stands.
The first step to getting a company funded is to understand where it currently stands. That includes the risks, potential rewards, and potential costs. Understanding your company’s strengths and weaknesses can help you figure out where to focus in the future.
Let’s take a look at some of the factors you should think about, and how they relate to raising capital for your company.
What Is The Risk For Your Company?
First and foremost, you have to be honest with yourself about the risk to your company. You don’t want to hide any risks that may exist, but you also don’t want to worry investors too much. This is the most important thing you can do.
Investors want to know about the risk to your company. However, you don’t want to scare them too much. They want to see how the risk for your company meshes with the potential reward for it.
What Is The Potential Reward For Your Company?
This is especially important in a fundraising scenario. Investors are giving you money because they want a return. They want to see that you can put that money to work. They want to know that there is a potential reward for them.
This is the financial upside you are hoping to get from the investors that are funding your company. It’s less important than the risk and available money, but you still have to think about it.
How Much Money Is Available For Your Company?
Once you understand the potential reward, you can figure out how much money is available to fund your company. What is the size of the market? How big is the overall economy? How many people are in the market that you’re competing with? What is the maximum market size you can hope to reach? How many people would need to use your product for it to reach a certain value?
How Much Of A Valuation Do You Need?
Once you have an estimate of how much money you need, you can figure out a valuation. This is the amount of money you’ll get if an investor agrees to put money into your company. At the same time, it’s also the value that investors will be willing to pay for your company.
How Do You Convince Investors To Fund Your Company?
Now that you know how much money you need, you can figure out how to convince investors to fund your company. Who are your target investors? What do they want in return for their money? Once you understand those needs, you can create a pitch that makes it clear to investors why your company is a good fit.
Raising capital is a lot like dating. If you want to get to the next step, you have to understand where you are now. Then you have to think about how to increase the positive aspects and lower the negative aspects. Finally, you have to figure out how to convince investors to fund your company. This can be challenging, but you can do it with a little preparation.