How do you go from 50k to 500k with the right approach?
As a startup founder and entrepreneur, your passion lies within the warm core of your business. Then comes the fact that you need to make sales, be able to scale and continuously grow your business. In addition, finding the right investors often becomes a full-time job itself.
We witnessed that many of you feel like it drains energy and takes you away from your true vision and passion.
Let’s give yourself 100% back to your business with the help of our 10 tips on how you can avoid the common startup failures.
Unfortunately, a lack of funds is one of the top reasons why a startup fails.
We highly believe in bootstrapping. It keeps yourself funded, proves your MVP and defines the path that you are following. Nevertheless, bootstrapping has a limit. Trust us, when you have the funds, you will fly closer to the sky.
10 mistakes a startup makes while they start looking for funding:
Failure #1 – Forgetting grants & incentives
Don’t put your laser focus on just one single source of funding. Combining funding sources will allow you to diversify the stake that someone has in your business. It will give you different expertise, and it’s not that much pressure on the person that’s investing. For it will be more difficult to ask someone to part from half a million euros versus a doable 150k.
Often, multiple funding sources are co-dependent on each other. Grants and incentives require you to co-finance. For example, if you have a 50k euro agreement on an incentive than you only have to search for 50 coming from friends and family.
Combine your sources and create the most optimal funding puzzle, so you can speed up your funding journey instead of chasing that single source of funds. This will allow you to get to your goal and go from 50K to 500k.
Failure #2 – Bad timing
The past months you were extremely busy with running your business. You realize that now, you’re almost out of cash. So, you start to stress out. You decide to hunt for funding.
However, the right time when to look for funds is the moment you don’t need the money. Start hunting when you’ve just raised a round or when your cashflow looks positive. Some benefits:
- You don’t look desperate.
- You have a larger variety or choice of who you want to work with.
- It gives more faith to the investor, because they feel you know what you’re doing
- You will be able to plan much better and be proactive instead of always chasing behind the money.
Failure #3 – One size fits all
You have a great business idea, a neat pitch deck and you practiced your elevator pitch 100 times. You’re excited and want to go out there and get yourself funded. Yet, is your pitch adapted to the type of investor you’re pitching to?
Note that every type of investor or investment house, whether it’s a government, a VC, business angel or bank, has different KPI’s and ways of evaluating businesses. Let’s take a look at the below examples.
If you’re searching for grants, they will mostly look at the technological potential, long-term prediction, proof-of-concept, and what is it that you can do for the economy and the government.
To the contrary, Venture Capitals are more looking at the commercial aspect, proof-of-market potential, short-term results and return on investment. They want to know how long their investment is supposed to be there for.
It’s like being a good salesperson. Make it personal, don’t be a sales ‘robot’. Know your audience and modify your pitch, business model and storyline to what they’re looking for.
Failure #4 – I can convince everybody in an hour
“Let’s just set up a meeting and see what’s possible”.
Imagine if 2,000 startups wanted 1-hour meetings with the investors.
Make sure your business pitch is like a foot in the door. It should be your resume. Send it out to a variety of people. And work with multiple formats such as a 2-page teaser, a smaller pitch deck that is more sales oriented, or a deck that is more detailed.
“Within the lengthy process, the pitch deck was quite important to get an invitation”, says Jimmy Pommerenke, founder of Ceeyo
Failure #5 – Give it a try
What is there to lose? You might wonder. Well, a lot.
Don’t give several investors ‘a try’. If you have your eye on a partner that you really want, make sure you are giving it your 1000%.
Start with categorizing different investment opportunities. Do a dry run of your pitch towards people that aren’t directly into your business. Be it an investor friend in another industry or someone you know who’s investing on a smaller scale. There are two advantages in this: first, you get experience in how to approach an investor. Second, you can apply their feedback as to not blow up your first impression on your dream investor. In short, learn from the feedback of category C, go to B and eventually, rock it at investor A.
“Our approach with The Factory was much more structured. They helped us build up the pitch deck and the relationship with the people we were talking with”, explains Jimmy Pommerenke, founder of Ceeyu.
Failure #6 – Excel forecasts
We see a lot of startups coming up with a hockey stick growth plan. Many investors see this as a first red flag, as a such growth is a difficult forecast only very few in the world can have.
It’ll be the first question investors ask: “Why do you think you will suddenly, exponentially grow this way?”. In our opinion, it’s better to show a more gradual but sustainable growth instead of a hockey stick projection that cannot be supplemented with hard facts.
Failure #7 – No news is good news
Oftentimes, there’s a lot of fine print in bank loans and subsidy agreements. Read carefully. For example, some ask to get back with some information in a few weeks. If you don’t, your grant or application will automatically be rejected.
Failure #8 – We still have time
Don’t underestimate the number of steps some applications take. It’s always better to be overprepared as to avoid last minute to-dos.
On the other hand, sometimes it’s just better to submit a month later or on the next round than rushing and having an application that doesn’t go through.
Failure #9 – The sky is the limit
As mentioned above, every party has their own KPI’s they need to meet. Direct your application at the right party, depending on what you aim for.
It’s good to have high ambitions but be realistic. Having higher ambitions means creating higher expectations and brings along more reporting considerations. You’ll have more chances of getting rejected if you’re not at the same level as your peers.
Failure #10 – Don’t apply
You might think you’ve reached the summit; however, your growth stage is only starting! Going towards the growth phase is the harder work, so applying is just something that you will need to do at some point. Don’t panic or feel nervous, just go for it.
Optimize your funding channel now with help of Aisha Saraf Kothari.
Aisha worked in transactions in New York for and continued her trajectory in Belgium where she’s helping other companies in expanding, merging, getting acquired, etc.
She also started own company: AISPI, a fashion e-commerce startup.
At The Factory her focus is to help startups get funded.
The Factory is the innovation center of EY, having a backbone of global partners. Our experts help startups from a to z: from finetuning the business plan and to go-to-market strategy, to figuring out your puzzle and optimal funding growth map. Together we prepare your pitch, write down your investor names and set up meetings. We help you close and negotiate the deals as well. More info here.