Seven steps to get you ready and set before you go raising funds
Wednesday, August 14, 2013/
When you have an idea for a start-up, it is one of the most exciting times of your life. Everything is new and fresh and the world is at your feet!
The first reaction is to think about how much money you need. And even though VC investment sounds like it isn’t that complicated, it is.
Here are our key pieces of advice to get into place before you even think about fundraising:
1. Don’t spend money on infrastructure you don’t need
Some of the best start-ups in the world bootstrapped their way into the big time. When looking at every set-up cost, have a good look at each one, and make sure that the money you are spending is in the right place.
Use Gmail, Dropbox, Skype, WordPress and other open source to get your communications off the ground. A start-up does not necessarily need an office and all the trimmings, so don’t pay for an expensive business card, rent and overheads where you don’t need to. There are more important things to spend your money on.
2. Find trusted advisors
There is a lot more to a start-up than just having an idea. If you are serious about moving forward and capital raising, you need to find a trusted advisory partner, and see them early. Use some of the money that you have now saved in infrastructure set-up to get the best advice for you.
Why? The start-up journey can be a minefield and good advisors/mentors can save you a considerable amount of time and money by stress-testing your idea and making sure you are set up correctly from the start. A good advisor will also keep you accountable and help you stay focused on the most important things you need to do.
3. Grants fill the gaps
There are many varied grants that you can apply for as a start-up, and this is a great place to start getting some kick-starter money, rather than bringing in investors. Grants are there to help fill the funding gap. There are small grants you can use to hire experts and advisors and larger ones to help you build out the product or service and start to commercialise.
Finding a grant can be like finding a needle in a haystack. There are currently over 600 grant programs in Australia with over $50 billion in annual funding available. Grants are competitive and most are assessed purely on the application. Get an expert who can help you identify the right grant for you. This will save you time and increase your chances of success.
4. Show and tell
Unless you are the founders of Instagram, no one is going to hand over a cheque without seeing something first. Flesh out the idea, get a prototype and make sure you have a solid funding plan and marketing strategy.
If you don’t know how to do this, get advice. Take all the energy that you have, use all of the advice we’ve given you here, and put it into your alpha prototype that you can confidently take to an investor.
5. Co-founder wanted
It is very difficult to get investment on your own. No one can do it alone – you may need to look into a co-founder for your start-up.
6. You need a money person
You have the ideas, but maybe not the experience with the money. So find someone who does. You can hire a virtual CFO, your trusted advisors can help you put someone in place. But if you don’t know what money is going in and out of the business, and lack systems to track this as you grow, you are setting yourself up to fail before you even get to investment. Professional investors won’t touch you unless your financial house is in order.
7. Surround yourself with like-minded people, not replicas of yourself
It is very easy to surround yourself in your start-up with mini-me types. But that will just lead to you beating heads with yourself. One of the best things you can do is think laterally and perform a skills analysis of where you and your co-founders’ skills start and end. Then look at hiring talent that can fill those gaps, but also have the right cultural fit to bring energy, passion, new thoughts and visions to get your idea to market.
Trust is everything when it comes to funding for your start-up, and unless you have a very strong track record, no one is going to just start writing you cheques to make your idea come to life. So make sure you have trusted advisors on board that have been down this long path before – with wins and losses. They can help you mould and shape yourself, your team, your product and your company into a structure that VC investors will find hard to resist.