Top 5 fundraising mistakes to avoid as a startup

A business may require extra funds to grow, market and scale hassle-free. 

Fundraising is the best combination of storytelling and data science. According to a report, “a cap table is critical for fundraising. It tells the story of a company’s operations, future perspectives, and long-term growth plans.”. However, most founders lack clarity over cap tables. 

It makes a startup un-investable, regardless of how good the product is.  The business owners must refine it with the help of stakeholders. Apart from the cap table, there are other mistakes that a startup must avoid while fundraising.

What critical mistakes one must avoid while fundraising?

One of the most critical issues startups face while raising money is- deciding the amount. Raising too low or too high money would not yield expectations. Yes, raising low money would not meet the needs. Alternatively, raising too much money exceeds the investor’s expectations. 

It increases the pressure to deliver.  Define your business plan and analyse the amount you need to go smoothly for 3 years ( at least). It helps you optimise the most important aspects. If needed- raise the funds later. Here are other mistakes to avoid while raising money for startup needs:

1) Lacking a clear plan to scale

It is just an extension of the above paragraph. Most investors require a business to have a clear plan. It must include the milestones to achieve and the funds required. It requires competitive research, analysing assets, liabilities, and the industry growth structure. Not having a detailed plan eliminates the potential to conclude the exact amount needed. It leads to clear rejection by investors.

Thus, an infrastructure can be created by analysing the operating costs. Include everything from hiring to the supplier. Explore if you need extra financial support to prepare the structure or buy equipment. Check the best way to finance despite a low operating history or credit.

You may get startup business loans for bad credit with guaranteed approval in the UK premises. These loans strengthen the foundation to initiate the business on a sound note. From financing working capital needs to pitching, you can use them for any business purpose.

2) Seeking funds too early

Timing is everything to get the right assistance at the right time. Some startups seek investment within 2-3 months of operation. It is too early to convince the investors of the company’s potential. Give at least 8-9 months of constant dedication to improving the company’s growth structure. You get the attention if you have numbers to show on the board.

Additionally, conduct a SWOT analysis to decipher the weak and strong parts of your business. It would also help you analyse the potential risk for the business and investors. Analyse the best strategies to eliminate the risks for the investors. You must have the best exit strategy in place. Otherwise, you may lose the chance.

3) Pitching to the wrong investors

7 out of 10 startups commit this mistake. They choose an investor randomly according to the popularity he shares or the net worth. The result is- ultimate rejection. Well, fund-raising does not work like that. Research the industry you want to operate in.

Accordingly, search for the best investors in the loop. Choosing niche-based investors proves the right choice over random ones.  Compare the investors in terms of the business funding.  Check the business size, stage and business model they have funded lately. Go through the portfolio before approaching any relevant investor.

Analyse the questions, the potential and the value they look for in a startup. If confused, hire an expert. He may help you with the data sets to present to the investors. The data represents your start-ups’ growth structure in a potential frame. Additionally, make sure you have the best answers to questions like-

• ·Why have you chosen this team?
• ·Why should investors trust you with the money?
• ·Are you an expert in the field? How? 

4) Asking for investment with the first interaction

It is one of the biggest mistakes to commit as an early-stage startup. Well, you may have a pensive requirement; don’t reveal it. Desperation to get quick funds within the first meeting ruins possibilities of interaction. Additionally, the investor may ghost you. What could be worse than being ghosted?  It ends all the opportunities for you to get the funding. You must start from a scale of 0 here.

Thus, instead of approaching directly for the funds, interact wisely. Analyse everything about the person you are meeting with. Showcase your expertise on a subject matter that interests him. He may be impressed with your subject knowledge and would like a second session. However, starting up a business is full of surprises. 

What if an urgent business requirement causes you to delay the meeting? You may not get the chance again! It’s your time to pitch your business for investment. If you can’t ignore the need but lack funds, get instant cash loans today. It is the best way to counter any short-term cash requirement. You get the money within 30 minutes. It prevents you from delaying the meeting with the investor.

5) Not developing an online business presence

Whether you are just starting or sharing the experience of over a year as a startup, an online presence is a must. Most businesses approach investors without numbers and online presence. Investors need something to bank on. Without data, you cannot win. Additionally, you don’t need money always to attract investors. Social media presence may help your efforts.

 Startups must dedicate time towards creating a robust online presence before pitching to investors. It helps you ensure something to show to the investors. Dedicated efforts of nearly 5-6 months may help you create good engagement.

Having a good presence about your products on social media positively impacts the decision. It reveals your hard work towards attracting customers to your products. Moreover, the constant newsletters and repeat purchases from social media may favour you.

Bottom line

These are the most common mistakes you must avoid as a startup while fundraising. Things like under-preparation and approaching the wrong investor may put you in a tight spot. Thus, analyse your business’s strengths and weaknesses. Try to eliminate the risk for the investor with a clear exit strategy. Additionally, having subject matter expertise with a failproof growth plan helps with fundraising.