Trying to secure capital appears to be a complicated situation for entrepreneurs, especially as the global pandemic threw a cog in the wheel of progress, making the flow of money slow down thereby creating a very challenging atmosphere.
Securing of fund as good as it appears can sometimes a curse, judging from the point of some investors wanting to quickly recover their money.
This pressure can cause startup founders to eventually make bad decisions on the business.
Whether there was a pandemic or not, startups ought to learn that they shouldn’t just jump on every available cash that comes their way, all in the name of trying to cushion the effect of the pandemic.
Getting “bad cash” can actually cause more harm than good for your venture.
It must however be noted that some challenges tend to spring up frequently as startup founders and entrepreneurs raise capital.
One of the biggest challenges startups tend to encounter in securing funds is timing.
For instance, in 2020, even the startups with the best of innovative ideas most likely missed some opportunities in the pandemic ridden 2020.
A significant number of VCs and angels had to put a hold on their investment as no one knew what would be the outcome in the long run.
A lack of quality relationship may also stand as a challenge as it takes extra and diligent effort to seek out the right investment partner who has the same long-term vision for your business.
Your partner investors ought to be interested in how they fit into all your different stages of funding.
How do you as a founder maintain this? It has to be through a healthy relationship with your existing and potential investors.
Many startups at the early stage tend to seek VC funds, at that stage they should either bootstrap or go after angel investors.
Another notable challenge is the lack of preparation for a pitch round. Though it must be admitted that striking a balance between operating a venture and fundraising simultaneously can be daunting.
However, a startup founder must be vigilant at all times to make a presentation.
In this article, we have come up with 4 ways to generate investors interest when funds appear to be scarce:
Pitch the right investors
Try to get your startup aligned with potential investors with respect to the stage your business is.
As mentioned earlier, if you are in an early stage seek angel investors, leave VCs for growth-stage startups.
A startup founder who has not laser-target his/her potential investors will end up pitching innovative ideas to the wrong set of angel investors. Pitching an entertainment deck to a fintech investor!
How do you expect them to wrap their head around a business model they are not familiar with.
Undergoing this frustrating process might be discouraging, however, with time you would get different feedback and interest that would change the narrative for you.
Networking
There are ways to develop your networking space online, especially through introductions from friends. You shouldn’t just focus on the quality of your network, but rather its reach.
You may be privileged to know highly connected investors, however, are they just limited to your location?
Note that investors often operate in social circles such that if one of them rejects your pitch, there is a high possibility that others may reject it too without necessarily listening to you.
That is why it is good to extend your networking circle beyond your geographical location.
Readiness for a deal
Do you have your proposal template right on ground or do you have to wait for an investment opportunity to show up before you do so?
In hindsight, you should have your pitch deck, business plan and similar documents updated for any unannounced moment that might come up.
A once in a lifetime opportunity might present itself, whereby an investor would be so much interested in putting a huge investment in your venture. Are you prepared for such?
An emergency runway fund isn’t a bad idea
Once you have raised capital, the next thing you do is to create a budget that will enable you to operate with a lesser fund.
So when you get hit by an unexpected event like the pandemic in 2020, there will be high chances of your survival moving forward.
The bottom line here is that you should leverage existing relationships while building new ones.
Irrespective of your activity/inactivity, ensure that you have your pitch deck and business plan ready for investors.
Particularly, understand the timing that appears to suit your business, else you will need to wait for a time to pivot.
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