Be SMART about your start-up’s fundraising strategy
It’s no secret that money’s vital to get a business up and running.
Unfortunately, passion alone isn’t enough to bring your project to life — you need to research your market, develop and test your products and services, advertise your business to its target audience and then, you know, keep the whole thing afloat.
Funding for start-ups is also essential because, without it, your brilliant business idea may remain just that — an idea. Some of the most established companies (think giants like Amazon, Google and Apple) wouldn’t be where they are today if they didn’t have a helping hand from an investor or two.
So, whatever the stage of your start-up, you’ll need to put together a fundraising strategy…
Create a winning fundraising plan
A fundraising strategy can make all the difference between a successful and a not-so-successful start-up.
You need a strategic fundraising plan with reliable groundwork to properly position yourself in the market and get in front of the right people. The SMART goal approach brings structure and accountability to your fundraising strategy and provides clear milestones to ensure you stay on the right track.
It’s time to get down to the details.
Of course, you want to raise money. But you need to be specific about what you want to accomplish. How much money will you raise? Who, or where, will you get your funding from and how?
It’s common for your first investors to be your friends and family before angel investors or venture capitalists swoop in when the idea has proven strong and low risk. But there’s no one-size-fits-all approach to getting off the ground. You may even choose to go for crowdfunding, crowd-lending or decide to take out a loan.
Every investor or funding source is different, so do your research.
As for all that investment money you’ll hopefully receive — you need to know exactly where it’ll be going and how you plan on making the most of it.
Once you’ve identified your goals, it’s important to make sure they’re measurable. It’s easy to know how much money you’ve raised, but what about other goals that are harder to quantify, like networking?
Contacting hundreds of potential investors isn’t easy — and cold emails to dozens at a time don’t set up a measurable goal with a clear outcome.
Why not create a spreadsheet to keep track of your leads and communications? Extend your LinkedIn network, attend start-up events and log the names of potential investors you connect with. That way, if your goal is to get the attention of five, 10 or 15 potential investors every week, it’s easier to measure your success rate.
It’s good to be ambitious, but you must also be realistic.
For example, when it comes to setting the fundraising goal for your start-up. Estimate how much you can realistically raise by assessing your business plan and financial projections. Once you have a rough figure, set a reasonable minimum and maximum amount.
Your fundraising goals need to reflect your mission, your business’ financial situation and what’s going on in your sector. It’s all well and good looking at what start-ups in other industries are doing, but chances are it won’t be relevant to your specific business.
Look at the funding landscape. What’s the average amount raised by start-ups in your industry and at your stage of development? Your sector and how much you want to raise will also impact which sources you’ll use for your funding. So, keeping your goals relevant to your start-up and what you hope to achieve is key.
Setting milestones is a great way to wrap your head around a timeline. Now you have your goals outlined, how long will they take? When do you want to reach these goals?
‘Secure funding’ is almost a pointless goal because there’s no sense of urgency and nothing to keep you accountable. But ‘raise £100,000 in 12 months through family investments and crowdfunding sources’ is a clear, measurable and timely goal.
Remember — fundraising isn’t easy. And you may come across many noes before you find the right investor. But with the right SMART strategy (and a lot of patience) behind you, every pitch, proposal and meeting will take you one step closer to launching your start-up to new heights.
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