The correct quantity of investment and overall support from enterprise investors could also be what a startup needs to move from the early-stage idea phase to a competitive player in the market. However, receiving funding from VCs has change into tougher. This makes communicating with funds an increasingly necessary step for startup teams.
To help startups and their founders overcome this challenge, here are some recommendations.
Determine your financial needs and schedule
Before you begin looking for financing, ask yourself whether your startup really needs investment without delay.
If the answer is yes, you wish to discover your foremost funding priorities. But that is not all. Financing stages and an appropriate schedule are also necessary, so divide your startup journey into series – A, B, C and beyond – and set specific, achievable goals for them.
You don’t need many and complicated goals, but the ones you have should clearly reflect your expected growth rate. In my experience, this helps a lot in predicting when your startup will need money next, allowing you to negotiate with investors in advance and avoid financial pitfalls.
Discover the full value of VC support
When contacting investors, a startup must understand not only the financial resources it needs, but also the non-financial ones. This shows that the team has a clear vision for development and may also help take negotiations to a deeper level.
In addition to capital, VCs have expertise and can offer strategic guidance and industry connections to help find the right product for the market, hire talent, or prevent overspending on marketing. Turning to investors solely for financing limits the provide help to can get.
Be prepared to do your due diligence
In 2024, investors are leading more rigorous and an prolonged due diligence period compared to previous years. So make sure your business is legal – otherwise it won’t even be considered.
Establish an appropriate legal structure (e.g., a limited liability company or corporation) and maintain up-to-date records. Financial statements, tax returns, customer contracts, worker records – investors will likely want to see all of it.
And remember to protect your mental property by registering trademarks or patents if you have them. This goes a great distance to showing that your startup is credible.
Build a detailed marketing strategy and financial forecast
A transparent marketing strategy may also help a startup stand out from the crowd and attract investors. And it doesn’t have to be overwhelming: just be specific and focus on the value proposition. What sets your company apart from a whole lot of comparable ones?
Avoid unrealistic numbers and explain your calculations. Inflated or overly optimistic forecasts can damage your credibility if you fail to meet them in the future. Please do not forget that the plan should at all times be monitored and compared with actual results. It is also a good idea to outline some scenarios in which something will go incorrect and what impact it’ll have on the expected results.
Create a compelling message
Your pitch deck is the face of your startup, so create it rigorously.
Discuss the most vital issues: the problem you are solving, product-market fit, business model, and so on. Base your narrative on data, show potential ROI, and highlight why your team is positioned for success.
Investors will appreciate your transparency and confidence.
Final thoughts
Securing financing and establishing lasting relationships with VCs requires thorough preparation. By presenting detailed and precise plans, a startup can show that it is ready for change and not only chasing money.