How to Get Funding for Your Startup

Starting a business from scratch can be incredibly daunting. If you’ve already made the decision to start your own business, pat yourself on the back for having the courage to step into a world of unknowns. While many believe that passion for what you do is enough to keep you going through the difficult times, there are actually several factors that determine the success or failure of a startup. 

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If you’re reading this, you don’t need to be reminded that you need capital to start a business. Trying to make a profit through your startup without capital is like trying to drive a car without fuel. No matter how hard you try to shift your car into the right gear, it simply will not move! Since most of us don’t have stacks of cash sitting around, we have to find practical ways to gather the resources we need to get our business up and running. 

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Before I jump into giving you practical advice, some of which I have learned the hard way, I must reveal a caveat. These tips that I present here are primarily based on “normal” circumstances which do not involve a global pandemic. It is essential to be aware that any type of pandemic, economic recession, or anything else that affects the world would influence the approach and practicality of fundraising. You would have to adjust your fundraising strategy accordingly. 

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With that out of the way, I would first advise you to look at your financial statements. If you have already started your company, you may be making some revenue. This is vital in keeping your company going. If you have this going for you, then keep doing what you are doing. Depending on your availability and resources, it will also be helpful to take on some other projects over and above what you’re doing, which is one of the most effective ways to fundraise. 

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There may be times when you need to accelerate payments for some of the invoices to support the operations of your business. In this scenario, you could consider liability through government support and alternative financings like bank loans or other FinTech companies. You can also fundraise by Angel, VC, and PE, and there may be other options depending on which sector you’re in. 

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In the early stages of your start-up, you are probably making projections about your financial needs, and you may wonder if you should bootstrap first and see how it goes before raising funds or if you should prioritise fundraising. There is one primary question you should consider when making this decision: Is this a company that you want to take external equity for? 

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Once you take the equity, there is no turning back. Depending on the price of the equity, you must ensure that you maintain a certain level of growth in order for the company to drive up the valuation and make it worthwhile for your early investors. But you should also be aware that not all companies are suitable for fast growth. It all depends on your specific market context. 

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If you decide to take external equity, you can fundraise or look for companies who are willing to invest, even if the market happens to be going through a rough patch. So, fret not, because capital is still available for early-stage companies. The key is to start the process early because you don’t know how long it will take for you to raise your desired amount of capital. 

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“Investors don’t invest in a dot. They invest in a line, which means that you must be able to show them a growing trend.”

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So engage them early so they can see your growth and support you through the process. This will be essential to keeping the investors on your side and building their trust in you and your start-up’s potential.

Fundraise Whether You Like It or Not

Fundraising may not necessarily be everyone’s cup of tea. While some may be energised by socialising and selling their company to investors, others may be intimidated by the mere thought of it. Although you can’t change how you are wired and what makes you uncomfortable, there are times when you just have to step out of your comfort zone. This is one of those times.

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Your approach to fundraising depends less on your personality and more on the sector of the industry. To put it bluntly, you have to fundraise whether you like it or not. There’s no doubt that the process can be pretty demoralising and challenging, but this is simply part of the job that you’ve signed up for. So, you have to deliver if you want your start-up to be successful.

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As far as your approach and strategy to fundraising, the primary aspect you should consider: the urgency and need for capital. In some sectors where the speed to raise capital is extremely important and competition is stiff, there is an urgent need to raise capital quickly. This was the case for us when we first started Funding Societies in 2015.

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Our initial thought was to bootstrap and raise capital much later. But we soon realised that the window for us to build a successful company was relatively short. If we missed the window because we didn’t take advantage of the opportunity, we would lose out to the market and eventually become irrelevant. So, we decided to raise the capital quickly.

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While this worked for us based on our circumstances at the time, this strategy of fundraising may not necessarily work for you. If you’re pioneering a new business model that has relatively low competition and there is less urgency to raise capital, then you can take your time and bootstrap for the time being. You know what works best for you and your company given the resources that you have. Trust your instincts.