Intro

Starting a new business requires many things to be organized, and it’s hard to track how and when you need to do it. Having a checklist during this time would be fully useful. This is why we went ahead and crafted a super granular startup checklist to make your business 10x easier. In this blog, we will discuss 6 major factors to be considered while launching a startup:

Fundraising is the core part of a startup’s success and a challenging task too for entrepreneurs. As the startup grows, its funding requirements grow as well. So startups seek the help of external funding sources like investors (VC, Angel), bank loans, and crowdfunding. Before approaching them for

funds, an entrepreneur must ask themself- Is he ready for fundraising? Now the question arises how he would get to know he is done with. Well, he should make sure to answer the following questions:-

An idea refers to introducing a new product/service in a market. Every entrepreneur has brilliant ideas, but the biggest challenge is to figure out which ideas can be pursued and turned into reality. Startup ideas are crucial for their success. Let’s check out the ways to know your business idea is worth persuading:

Make sure to have a viable startup idea in hand to achieve high profit and growth in the future. Hopefully, these ways can help to blossom into a successful venture.

As far as any business is concerned, it starts and ends with employees. No startup/business can rest on the shoulders of a single employee. At some point, it requires the right set of team members with combined efforts to attain their goals. The stepping stone to a successful startup will be a strong team to carry your startup to the top. The following are the team members to be considered while building a solid startup team.

Having a killer business idea and plan is not enough for startups. It requires the best team members to make good things happen. Once you create your business idea, make sure to hire the right team for your startup! The roles and responsibilities of these team members may vary from business to business.

The most significant hardship for an entrepreneur is often securing appropriate finance. They may depend on various sources for funding. Venture capital (VC)is one of the many solutions referred by startups to finance new or growing businesses in exchange for equity. It is a good option for innovative startups looking for high growth potentials. The one who invests venture capital in business is called Ventre Capitalist. Using venture capital, startups can access a more considerable amount of money to have customers and resources.

Further, it can also provide substantial expertise, connections, and consultation to your early-stage startups. However, the road to VC funding isn’t as easy as it seems for every startup because they lack a trade history. So, before seeking VC funding, you need to ensure whether its the right move for your startups:-

Considering the factors mentioned above can help you know whether you are in an excellent position to seek VC funding. Obtaining VC is a fierce commitment for startups. Nevertheless, Make sure to find the right funding source for your startup.

USP is the abbreviation for Unique Selling Point or Unique Selling Proposition. USP is one of the fundamental elements of a marketing campaign. Simply, it refers to what you sell, to whom you sell, and why you sell in the market. A USP can be a unique product/service, attractive customer service, company mission, or brand awareness that focuses on customer value. It makes your startups stand out among the competition in the market filled with similar items. Startups should have in-depth knowledge about their target audience, competition, and industry trends to find their USPs. Useful, interesting, and engaging USPs are essential for all startups. A powerfully built USP can aid you in making marketing and business decisions.

Before developing a USP for your startup, an entrepreneur should ask himself why people choose to buy your product/service apart from other competitors? The reason may be low price, high quality, good customer service, fast shipping, return guarantee. Well, If you want to know how the world sees your product/service, ask your target customers who choose you. You can email a survey or conduct interviews with them to craft your USP. Note down your competitors by googling and preparing a list of distinctive benefits that you intend to offer. 

Suppose; if 80% of customers buy from you because of your best customer service, this becomes your USP.  Then add your tagline as, for example, The safest car with the best customer service! Here are some examples of successful companies USPs to get the point:-

Head and Shoulders- “Up to 100% Clinically proven to reduce dandruff”.

Bosch- “Invented for life.”

Dominos Pizza- “Fresh hot pizza, delivered in 30 minutes or less or it’s free”.

Dollar Shave Club- Shave time. Shave money.

Every company is different and has its own USPs, but the goal is to convey why your products are better than competitors. As a startup, you will be entering the market with other competitors; it is mandatory to be aware of USPs to attract customers. So after deciding the business idea, don’t forget to think of your USPs!

Finance is the lifeblood of business. Right from the moment an entrepreneur thinks of a startup, there arises the need for finance to grow and scale. One of the most common reasons why startups fail is due to a lack of funding. Without proper funding, a startup struggles to reach its potential. So it is more vital to state the funding requirement before looking into its sources. Listed below are some reasons to raise funds for startups:-

• To get started:

• Asset purchase:

• Cash flow:

 • Business Expansion:

• To develop new products:

• Additional value from investors:

• Attract potential market:

Define the purpose of raising funds to your potential investors so that they can reach out in your funding issues. The exact funding requirements depend upon the type, the current situation of a startup, and the value they offer to the public.

You will be excited to get your work ready after having a great idea and team. But what about fundings to bring these ideas into reality? Startups today have numerous options to get the financing they need. One of the options is approaching investors who allocate capital and resources for the smooth working of startups. Defining what type of investor your startup needs will be quite hard. Take a look at the types of investors for startups.

• Personal Investors:

• Accelerator:

• Incubators:

• Venture capitalist:

• Angel investor:

• Peer to peer Lending(P2P):

An ideal investor provides more than money. Investors have a network of successful investors, entrepreneurs, and senior managers that may help your startup get connected in the future. They possess industry knowledge and operational experience, which many entrepreneurs lack. You can clarify doubts relating to products, financials, hiring employees, market opportunities. Besides, it helps to manage the capital and infrastructure of your business. The choice is yours- whether to seek just money or both money and expertise. Different investors have different goals. Do the research and examine them thoroughly to determine what kind of investor your startup needs.

As a startup, you might accept funds from any investors you find around. In addition to funding, investors provide endless advantages to startups. They become part and parcel of your business relations, making it essential to understand the qualities of the right investor you are searching for. The traits below are necessary for new ventures to know about their potential investors:-

More than money, experience is significant, which makes startups scale quickly. Startups may look for an experienced investor who has a proven record of investing in other similar industries. Additionally, they should possess in-depth knowledge about their industry and business domain.

A startup look for a trustworthy partner come investor who keeps their business information confidential.

The startup faces challenges in the initial years. It will be advisable to choose an investor who can cope with challenges and remain calm and patient rather than act emotionally. He must be ready to take risks and learn from mistakes. So make them aware of your potential risk.

Beyond funding, a startup seeks those investors who act as mentor, advisor, trainer and guide at the same time. He should be supportive in both the thin and thick times of the startup journey.

The path to startups is not a straight line; it involves a lot of twists and turns. That means external factors like natural disasters, politics, fashion, and demand adversely affect startups. Startups highly recommend an investor who has a positive mindset to adopt these changes and stay flexible.

Last but not least, It will be a better option for startups to have an investor who is well confident about his abilities, talents, skills, knowledge.

Finance is vital to get business up and to run. In addition to the investors, as mentioned above, there are other financing options available to startups. Let’s check at those points one by one

• Bootstrapping:

• Crowdfunding:

• SBA Microloans:

• Revenue-based financing:

• Partner financing:

Investors are not only providing financing options for startups. Entrepreneurs can consider any of these as the best option, depending on the nature and type of your new venture.

Before getting started, you have to define the technical phases of a typical startup, such as deciding the role of the individuals in the organization, the process you have to go through when raising funds, preparing the budget plans, how much equity are you willing to give, and how you will increase the fund. Further, keeping a better timeline for all of these processes will be ideal. 

The following points will provide insights into the technical aspects you should look into while launching a startup.

• Decide which person is in charge of the fundraising:

• Choose advisors/counsels for the round:

1. Onboarding advisors having profound knowledge about fundraising tactics could be beneficial and help raise more in a shorter time.
2. These people have a deep relationship with many investors, which puts you to make intros with them.
3. They can streamline the process by performing due diligence and also help to prepare necessary documents such as pitch deck, financial model, and business plan.
4. Further, they also organize meetings and follow up with potential investors for the rounds.

Not every startup needs an advisor/counsel, nor do they guarantee success. The decision to consult them depends on the entrepreneur’s choice.

• Decide how much you want to raise:

Before stepping into the process:-

1. Estimate your monthly expenditure (including employee placement, marketing cost, research and development cost) and;
2. key milestone i.e to the achievement to be measured in terms of product development, customer base, team growth) to get an idea about raising the money.
3. Conduct a discussion with the potential investors to know whether the budget presented is more or less.
4. Calculate company valuation to determine how much to raise.

Suitably spending your money is a careful step you have to make after getting funds. You have to act very responsibly to allocate these funds in the best trial. Most of the startups fail due to one reason, which is not utilizing the fund properly. So, A proper budget has to be prepared to avoid unnecessary expenses. Eventually, these startups may become bankrupt. You have to develop an eligible plan to allocate all these funds in the best way to have a better position among the competitors.

1. There is no need for fancy offices.

2. Customer acquisition

3. Operational expenses

4. Staffing

Getting funds is a highly challenging task for a startup venture. Founders need to ensure that the fund is used efficiently.

As a founder, your business can be a powerful personal thing. Transforming a thought into a completely fledged entity requires lots of effort and emotions. Each business is unique, so regardless of whether you’re thinking about Angel Investment, Private Equity, or another sort of finance totally, there’s no set standard to decide how much equity an entrepreneur ought to be hoping to offer.

Most advisers would discuss a general guiding principle that you should consider giving 10 – 20 % of your equity. Giving up more can be a risk factor because you might face more funding rounds in the future, which might dilute your share further. So, if you gain enough money and hand over your bulk equity, it might put you in trouble afterward. Even giving them low equity is also questionable. Less funding means less equity transfer; asking less money will not assist you, and even the investors will not have enough commitments to put your company in a good position.

Perfectly value your business as accurately as possible, and showing your work is essential. It gives investors a clear perspective on your business, the money you need, and why you need it. From that point, an investor may scale you back or hope to contribute more, depending upon your business and their perspective on it.

Standard fundraising options for startups include – Unpriced rounds and Priced rounds.

Unpriced rounds are debt instruments converted into equity at a specific discount. This round does not require company valuation and SEC filing. It includes -Convertible notes and SAFE (Simple Agreement For Future Equity).

Convertible notes are debt instruments sold to investors where they pay you for the note. Later, you must pay back the investor the value of the note, plus interest. SAFE is not a debt instrument; it is a form of warrant converted at any dollar amount. It comes with an interest rate and maturity date. Founders who want to raise quickly and reach its milestone can opt for this instrument. Founders who want to avoid interest rates and maturity dates can go with SAFEs.

Priced rounds:- Priced rounds depend on the negotiated valuation of a company. Startups can raise money by selling the preferred stock at a price/share determined by the valuation. It requires company valuation and SEC filing. It gives you an accurate picture of your startup’s worth and division of ownership.

Creating a timeline is a plan of action that ensures every task is accomplished within a specified time. As a founder, develop a timeline for each fundraising rounds in a year’s calendar and keep track of it. Set time for the technical details mentioned above. Stick to your plan as you go along and make changes (if needed) accordingly in the next year.

If you have an innovative concept to start a venture, you have to be completely ready with all the possible things. Because launching a startup is one of the significant milestones for every founder. So, there has to be an adequately aligned plan for each step. Being a founder, you have to be ready for any situation you might face in your startup journey. The more you are prepared for the problem, the less you need to fear.

There are some elements to be taken care of while building a startup. Likewise, there should be an innovative idea and a good product/service to present in the market and validate your startup. We need a good management team to control overall function and organize all the activities before it. Further, there has to be a proper budget plan to allocate all your funds. You can also come up with some alternative solutions if your plan A is not meeting the mark.

Before you get started, check out these points to have a better position yourself with your startups.

Listen, Observe and learn from others:

Having a conversation with other founders will give you some input and confidence in building a startup. Try to be close to them to get a bit of quick advice, like how they have emerged, the difficulties they have come across, and how they overcame them. Also, if possible, share your ideas with them and get suggestions, and send them feedback. Adding to it, closely watch your competitors and be prepared for their rivalry. Get a talk to the customer of your competitor company, learn their requirements. This pre-execution stage can turn into a validation, market, and customer research stage.

Advice from the founder or leader of your competition company helps you deal with the situation very tactfully. Try to understand their marketing strategy, their customer’s requirements, how well they are solving the customer’s problems related to the products or services, their challenges throughout their journey, plans, and visions. Eventually, these inputs from the other founders can lead you to build your business plan.

In most cases, the early-stage startups are a comprehensive series of untested hypotheses. The strategies and tactics which your competitor uses may not fit your slot. However, it is one closest benchmark to improve your expertise in decision-making for your startup.

Most of the startups fail because of a lack of market needs. Yes, the “customer” we are talking about, one of the elementary steps to be taken care of is to take the opportunity to speak with your future customer. Just so your startup can quickly adapt their requirements and fill their needs.

In total, it is all about building a startup’s basic knowledge, understanding what you are, close examination of other founders, and having a good conversation with the customers is a lot better in developing face. It is the initial step for the execution of a perfect startup.

Create a virtual data room with all additional information.

While going for the funding, you should not be stuck with any of the documents. All the required documents should be prepaid appropriately before meeting your potential investor. Some of the things that need to be taken care of are financial modeling, investor pitch deck, business plan, IP certificate, and market plan. After receiving the potential investors, additional documents such as term sheets and all other financial records must be ready. All the documents required should be sufficiently prepared.

Answer common investor questions for yourself

All the investors want is the profit from the investment they make in all ventures. For investors to make any investments, they need to know about the company further in detail. So you can expect some in-depth question that provides them with an enumerated understanding of your startup.

Be prepared with the question the investors might ask you. After all, convincing them is one demanding task that you have to face. Here slightest of your mistake can make the investor withdraw the proposal. So thorough study and knee preparation are very much required to approach the investor in the proper sense. Before heading to the investors, try to ask questions yourself in that means you will have the confidence to speak with the real investors.

Some of the possible common questions they might ask can be;

• Is your market opportunity ample?
• How good is the team you have?
• Are the founders familiar with the financials and critical metrics of your business?
• What is your business model?
• What could be the potential risk for your business?
• Who are your current competitors?
• What are your distinct features from other products?
• Have you done your financials? How well are the projections?
• What are the uses of the fund?What is the current financial round?
• When will be the breakeven for you?

Likewise, the investors ask numerous questions. These questions are just small glims. There is a lot more coming from the investors. You can practice all the possible questions by yourself to avoid getting stuck with the investors.

Creating a financial model/plan for next years

Preparation of the financial model is another substantial element you should take care of as a founder. It is the nuts and bolts of an organization. It has some significant roles before you go in front of the investors. As the number is more credible than any of the data, investors will go with the financial model upfront without considering other facts of the business or startups in most cases.

The financial model is all about understanding how well you allocate your resources and utilize the money to cover expenses. It also gives a clear idea about how well the company will perform after a fixed period. By seeing those projections, investors will have the mind to take part in your startup journey by handing you funds.

For this matter, there are some things to be taken care;

Collection of current data

To build the financial model, gathering data is an explicitly considering mechanism for the proper assumption. Getting down adequate information is a challenging task. By collecting all the data, you have to understand whether these data will fit the requirement. Collecting the prevailing data will improve our financial model compared to the previously available information even though it is accurate. It is because current market data gives an idea about the present scenario of the recent market growth. Some of the ways to collect the existing data are with the help of Questionnaires, surveys, conducting interviews, observation, documents, and records.

Agree on a critical assumption

Formulating a realistic financial model for a business is a necessary process. It has a huge place in terms of decision-making situations in the organization. You have to spend an excellent time researching to get the correct data to devise the financial model. Building the model requires utilizing the critical assumptions as they are the basic building blocks of the financial and business plans. Usually, it contains all the essential information needed to create a financial model. Key assumptions are fundamental to all parts of the financial forecast – balance sheets, income statements, cash flow, business plans. They incorporate the detailed cost of sales, forecasted sales volumes, general administration costs, and others.

Play with different scenarios.

Simply preparing the financial model does not make it perfect. Whatever the model you have built, it has to be run through different scenarios. It is the process of surmising and evaluating the possible outcomes for the future. Scenarios help identify the business’s change and the fluctuations of cash flows when there are possibly excellent and negative occasions that could affect the startup.

In the organization, there can be three types of scenarios.

Base case scenarios
Here, this particular part is very average because the financial model builds can either be highly effective or not at all compelling.

Worst-case scenarios
This situation is one of the severe factors to be considered while building the financial model because this projects the serious negative outcome of the constructed model. This could be the boundary line that the company might face downward; it will not affect further. Overall this case is a negative case for the overall company.

The best-case scenarios
These are the most preferred scenarios by all the entrepreneurs and the people who create the financial model because it shows its growth as expected. The thing will be according to the plan decided by the higher management. When it works according to it, the higher the productivity it will be.

Most people who create financial models check these scenarios to get an idea about the anticipated profit or loss, thereby making better financial decisions.

The pitch deck is a set of slides that gives a complete idea of your company, product, or services. It can be a powerful tool if a person is seeking funds. Investors ask for the pitch deck for the understanding of the company top to bottom. As it is designed well, they will have the concern to take a look at it.

All the decks will have a storyline that makes the investors pay attention to the company. After the storyline, the content will be in a position that clarifies the company to the investors. The founder should decide what content to be included in the pitch deck and which slide to place in the correct order. Choosing which slide to fit in the deck is complicated because the investors’ taste varies from individual to individual, so it takes expert advice to solve that problem.

Collecting the traction metrics is also one thing the founder has to concern about, as it gives the idea about how the company may progress their future growth. More than market facts, the ‘number’ gives you more credible information about the improvement of your startup. So it is better to include traction metrics for the pitch deck to make the investor more attractive. After preparing the deck, try to show it to your close friends or colleagues to get their suggestions.

Practice your pitch

When all these are correctly lined, you need to practice your pitch. The technical term used in the business context talks about how well the startup will do and benefit an investor by investing in it.

Launching the startup involves many processes. You have to handle all the procedures very delicately, as a tiny mistake can cause a considerable loss. The founder should be well aware of each situation. 

When a startup grows, it requires sufficient funds to scale its operations and achieve potential growth and target. The fundraising process is a roadmap to organize your selected investors on the right path. It is a comprehensive and lengthy process yet a turning point for startups that requires thorough research and planning. Let’s go into its process in detail:-

Create an investor CRM:

CRM (Customer Relation Management) is the software for managing potential and existing customers. Building a close long-term relationship with investors requires clear and on-time communication with them. Investor CRM makes it possible. It is a software that provides a centralized dashboard to access in one platform like investor’s database with their contact information, reusable email templates, investor questionnaires, follow-up options, pipeline tracking. It is convenient for the startups to speed up the fundraising process and access the right investors interested and similar to your industry. The following features of investor CRM:-

• Using this software makes it possible for upcoming startups to search and find reputed investors worldwide.
• Startups can categorize the list of investors based on interests/segment/industry.
• It’s just a click away to find the genuine contact information of investors using this software.
• After connecting with potential investors, add their names to the CRM software. Reject the contact information of those investors who are not interested in you. This CRM software arranges a Prompt follow-up feature so that investors can know whether startups had wholly vested in their deals through phone calls or emails.
• Another essential feature of that is that it helps schedule meetings and notifications on time, making the follow-up with leads easier.
• Pitching every investor is not possible, and it consumes time. This CRM software creates a strong profile of potential investors that allows for tracking dead pipelines in detail.
• The software keeps updated every detail/information, including past, to maintain strong synergy with investors.

Create a target list of possible investors:

If you decide to raise funds for your startup, you need to meet endless investors. It seems complicated to get a couple of “yeses” from them. To simplify the meeting of these investors, a target list of investors is necessary. A targeted list of investors refers to creating a shortlist of potential investors. The more targeted the list, the better will be the chance of getting funded. It aims to find the most desirable investors who add up value to your startup culture. Further, it saves time, energy, and money for pitching to the best investors. Certain points should be taken into consideration while targeting the list of investors. Let’s have a look:-

• While listing down the possible investor, ask yourself- who will invest in your startup?  Who is looking for higher investment?
• Make sure to know the reasons for how and why you raise money.
• Prepare a powerful and winning pitch deck to attract investors.
• Target investors who share the value and culture of your startup and who like to invest in similar types of things you spend?
• Go for investors who get excited about your idea/product/segment.
• Confirm they possess deep industry knowledge and experience in the areas you lack.
• Pick out the angel and VC investors than other sources, who brings more connections to your table.
• Ensure investors can take reasonable risks and challenges in the upcoming years.
• He has a solid record of building successful businesses and making investment deals happen.
• Get as much information about investors’ addresses, phone numbers, emails through various websites like PitchBook, Mattermark, and Crushbase.

Answering these questions can help you to list down the targeted investors for your startup.

The Research investment focus of investors:

After Collecting the targeted list of investors, the next step lies in researching the interest of your investors. Different investors on your list might have a diverse choice of investment. So recognizing the rightful investor for your startup is a prime concern. Some investors prefer tech startups, agriculture startups, and education startups; likewise, it varies. You have to conduct an in-depth study of the investors and their focus of investments, like which industry they would like to have a hand in. By sorting out this, you can approach the investors with complete confidence as your venture is according to investment flavor. 

Create a contact strategy for every investor:

A contact strategy refers to the method for how you contact and communicate with your potential investors. After creating a targeted investor list, it is essential to build contact strategies to keep in touch with investors. Inventors are seen everywhere but start looking for an opportunity to meet and develop good relationships with them. The following are the essential ways through which investors get connected;-

In-person networking:

Since Meeting in person happens in real-time, it helps to receive direct and honest feedback and remain memorable for investors. Body language like eye contact, facial expressions, and gestures make it easier to build trust and create more interesting conversations. Further, it enables to share fresh ideas and understand needs and requirements clearly.

Social media:

Social media is a great place to contact investors because it allows meeting many investors quickly. Following are the social media channels that focus on connecting investors:

LinkedIn: LinkedIn is an absolute contact strategy to build relationships with investors. Follow every investor in your target list who has a profile on LinkedIn. All you need is to create a profile on LinkedIn and reach out to investors through the search button. If they accepted your request, go for an invitation email.

Facebook: Facebook is also an excellent place to gain essential investors contacts. Share investment-related blogs and stories and stay active all the time helps to attract investors.

Twitter: Twitter is a helpful tool for startups to have a thoughtful and engaged conversation with investors. Using hashtags or keywords, search features, directory services, following the news can help reach investors.

Events:

Industry-related events are the best ways to contact investors. It provides a platform where you can pitch your ideas to thousands of like-minded investors. Find investors to introduce you to them and try to build a network. Be open, friendly, and confident, and get to the point quickly. Avoid being aggressive if they are not interested. Keep the conversations as short and straightforward as possible. Further, consider attending events like charity fundraisers, sporting events, film festivals, and yacht shows.

Mutual contacts:

Meeting through mutual contacts like friends, relatives, colleagues, and neighbors could be the best to contact investors. Further, a university network of alumni or business schools having past alumni can help to find investors.

With proper research and planning, founders can decide on a good contact strategy for their startup.

Ask for intros:

Ask for intros refers to asking your mutual connections to introduce you to potential investors. Getting an introduction is the lifeblood of our growth and yet a time-consuming process if you don’t know the investor personally. Instead of begging someone to introduce you, please email your contact and let them forward or copy/paste to investors. When asking for intros in emails, include a maximum of 5 sentences, and don’t jump into asking for a one-hour meeting until they are interested in you. Start research about potential investors who are an excellent match for your new venture. The intro request should state the key reason you want to meet them and basic information about your startup.

Moreover, think about what would make the intro request compelling to the investors. Do remember to follow up with your contact once you get the intros. In short, be concise, audible, and good at asking intros.

Talk to other founders, which investors are most helpful on their capable:

Getting information about possible investors is very tough. It would be best if you had done your research thoroughly. It helps you a lot when you seek help from other co-founders who currently exist in a good position. They might have numerous pieces of information about investors, such as choice and pattern of investment, that could help your startup by all means. So by taking that information, you will get the idea of which investors will be more helpful to scale your startup.

Schedule meetings and pitch investors:

Meetings are being conducted to share ideas, information, feedback, and learn from each other. The first element of the meeting deals with the schedule. Scheduling meetings with investors is the most crucial part of the fundraising process. The primary purpose is to sell your business idea and to onboard them to contribute funding. Moreover, investor meetings are said to make or break the moment of fundraising. It can be a bit difficult to schedule a meeting for the very first time. Following are points to be noted whiles scheduling investor meetings:-

• Investor meetings are part of due diligence. So, Go through the targeted investor list once again and make sure they are suitable for your startup.
• An investor may not wait for your turn to ask for opportunities. Be prompt in your response.
• Always send emails in BCC to investors, so they know who else is receiving the mail.
• Always suggest a specific date and time let them know you are going to be there soon. Provide an alternative date and time if the investors can’t catch on the same.
• Always remember to inform investors if you want to cancel the meeting at the last moment.
• Show more passion and dedication to your vision to stand out and be readily noticeable.
• Instead of asking for money in your first meeting, try to build a relationship with them.
• Always get your documents ready. Documents include business plan, financial information, pitch deck.
• Send Follow up messages to investors either through phone call or email. Express your gratitude at the end with a big thank you. Also, arrange the next meeting in the form of a Call To Action(CTA). Be polite, confident and make sure you know what you’re talking about. Mention when and how you’re going to raise funds.
• Show a fantastic pitch deck that showcases the product, team, business model, and technology.

Pitching refers to a presenting business idea to convince potential investors for fundraising. Apart from raising funds, it provides an opportunity to interact and build relationships with investors. Investors are pitched by 1000’s of investors. Proving how your business will survive and catch the attention of users is what sets startups apart. Below are some tips to be considered while pitching investors:-

• If the investors are already aware of your business, don’ts go deep explaining the concepts and leave time for investors to speak.
• A time slot for 10-45 minutes is allowed for entrepreneurs to pitch to investors. Keep it simple, concise, well-organized.
• Go for research about your investors to whom you’ll be presenting.
• Get ready with your pitch deck detailing business models, GTM strategies, financials, target audience, competition, team, exit plan.
• Tell an exciting story on how your product/service works and what is unique about it.
• Crunch the numbers using charts and tables and show what and how you need money for investing.
• Know your competitors and how you build justifiable into your business model.
• Practice your pitch again and again.

These meetings and pitching with investors share information and build trust and relationships with investors for overall business success.

Create and send out regular investor updates:

Constant communication with investors is a key to a startup’s success. It becomes essential to regularly update your inventors about what’s going on in your business and how they could help you. Sending investor updates can help keep them engaged and gain the proper attention, thereby building trust and steady relationships with investors. Additionally, sending updates has various benefits in terms of fundraising, introduction, promotion, networks, advice, investment of more capital. Thus, keeping investors updated is vital to get their support in the future.

An investor update should include a summary of the last period, product launches, traction, upcoming fundraisers, key hires, revenue and growth metrics, success stories. It is usually being sent out monthly, quarterly, or annually. Select a schedule for your updates and stick to it. Use a simple email format and present it in bullets, numbers. Keep the content concise to hold the investor’s attention. Also, investor updates are done through social DM, SMS, or via an online data room.

Create investor criteria list:

Investors are a crucial part of any startup as they provide funding support to the company. But you cannot simply go to an investor without knowing their preferences to invest in which sectors. First of all, you need to make a list of investors. By sorting out the names of some credible investors, the next task is to study their nature and preferences, like their taste of investments, their past investments done, and how they will raise the fund. The interest of the investors varies according to the different styles of the startups.

Finding the right investors for your startups is an essential factor that you need to consider. An investor should create value for your venture by funding. Some of the preferences which the investors do consider can be-

Industry

In this category, investors who support the startup will go for the industry check whether the current industry which the startup has initiated can grow at its full potential or not. Here the investor will try to generate the value for the startup for the particular industry. So you have to identify which investor is interested in which one.

Location

Location matters a lot for some investors, and they prefer to invest in a nearby area that helps them observe their investments. Or rather, they give importance to the local startups. Startup valuation can also vary from a different location, for example. The startups in Bangalore or Mumbai can have a higher value than Himachal Pradesh or Sikkim startups. 

Here it can be a problem when coming to the future fundraising processor for an exit strategy too. Investors feel difficulties in an exit as they care about the location. Your decision should be favourable for your startup for choosing the right investors who prefer their place.

Track records

The investor’s track record for treating their founders is one of the factors you have to consider. What about taking part in financial rounds? What is the successful exit?. These questions you can make out how the investors will act for your business. Also, ask them about their portfolio of investments and their recent investments failure. These questions can give an idea about how they help in your difficult times.

What they can do for you

For an experienced entrepreneur, money is the minimal measure of significant worth that they’ll get from good investors. If you have a promising startup that will scale in the future, then funding is a sure thing. So you have to find an investor who can give you good advice, connections, and other benefits, an investor who can take you from your current position to the next level of growth.

By sorting out these lists and their area of preference, you will find an idea of investors who are credible for your startup. It reduces the vast list of investors you have and cut short into your startup’s preferable investors.

Evaluate Investors Based On This List

After collecting the details of the potential investors, you have to sort it out according to your requirement. From the list you made, it will be a simple job to find an investor who can satisfy your needed funds and give pieces of advice. You have to identify which investments will help you improve your current position and find the investors who will make that investment. It is a meticulous process to meet the investors telling your needs and gaining the fund, so you need to be well prepared. The slightest of flaws can cause you massive damage. 

Do reference calls for investors

Onboarding new investors are a long-term decision that requires due diligence. Reference calls are an essential part of due diligence to ensure potential investors have worked with other companies.  It is a handy source of information conducted when investors are ready to invest before making decisions to work with them. The call will be for 15-20 minutes. Prepare a references list to talk with those people to whom investors are well-known, such as friends, colleagues, and peers. One can start the conversation by introducing himself and his purpose. The following are the essential questions to be asked:-

How do you know the investor?

How long have you worked with the investor?

Could you share your experience with him?

What are his strength and weaknesses?

What kind of investment do they prefer to do?

Do they come prepared for the meeting?

Do they have potential skills, industrial knowledge to invest in a startup?

How does he react to upcoming challenges or risks?

What is the value-adding things investor has done for your company?

What is your opinion on me working with this person?

You can add more questions and end the call by thanking the person for their valuable time.

Push investors to give commitments:

The entire effort for the fundraising process is to impress investors to take your startup to the next level and consider it a good investment. If your product/service is super fresh and unique in the market, they will be full-on, ready to put their money behind it. You should show a business plan to scale your new venture and make their money back. Also, Project a revenue model that cuts down all the unnecessary costs and expenses (since they may not be able to spend more on the initial period of its operations). These will make investors believe your startup is something worth investing in. Likewise, there are several ways to convince investors to give their commitments. So try your best to impress them. It will not be possible in a single day or night, but keep looking for your desired partner with determination and confidence.

Negotiation is a must-have for every startup fundraising. Negotiating the terms refers to an interactive process between investors and founders who agree to reach some form of compromise without arguments. A good negotiation brings better bonds and closes the best deals with investors. Let’s discuss some of the negotiating terms in startups:-

Understand what is important to the investor:

Every Investor will have their interest, requirements, preferences. They focus on getting more return on their investment and look from different angles/perspectives to get the best investment opportunities. Startups should get into investors’ minds to know what is important to them and consider their concerns to attract them and get funding. Moreover, they are not just investors, but also a partner who provides several connections, and advisory for your new venture’s upliftment. Let’s look at things that investors expect from startups:-

• Investors need a well-backed business plan to know the features, competition, target market, marketing plans, and strategies of your product/service and make sure their investment is worthwhile.
• Investors expect to get a new and innovative business idea with a competitive advantage to stand out in the market.
• Investors invest in people, not the money. So they look for experienced entrepreneurs and a strong management team they can trust.
• Investors take an honest look at the financial performance/stability of your startup. They need concrete evidence for these questions- why do you need the fund? How are you going to spend on it? When will they get their money back?. So, Be prepared to respond to it in advance.
• They like to invest in solutions with significantly large market sizes and a customer base with limited competition.
• They are interested in investing in those startups they can relate to, generating more profit and scale quickly.

Model your Cap table:

 A Capitalization table (Cap table) is a spreadsheet that depicts a startup company’s total capitalization or total ownership stakes.  It lists down securities like common stocks, preferred stocks, warrants, convertible stocks, restricted stocks. Investors usually ask startups to show their cap table to know who has invested, how many shares are given, how ownership is diluted. Startups can use this information to understand how to price fundraising rounds, forecast the potential payouts, and accurately present the startup’s history and holdings in the event of an audit.

The cap table is prepared in a spreadsheet with a simple layout at the initial stage of startup operations. It represents the name of investors on the Y-axis and the type of securities on the X-axis. Listing of investors can be done in either ascending or descending order based on their ownership. With each fundraising round, the cap table needs to be updated to reflect the changes.  There are multiple ways to create a cap table and no standard format for it. Thus, a well-organized cap table can help you to make intelligent decisions for startups.

Model exit scenarios with current terms:

Exist strategies are being used by the investors, owners, venture capitalists, or traders who get out from the investment according to their interests after a certain period. The investors execute a plan to jump from one investment scenario to join an area or sector to invest. 

The standard type of exit strategies are:- 

• IPO(Initial Public Offer)
• Strategic acquisition
• management buyouts

According to the founder’s interest in how he wants his company in the future, these plans are decided according to the founder’s interest in how he wants his company. For example, a strategic acquisition will relieve the entrepreneur of all roles and duties in their company as they surrender control. And if you plan to get on the stock market by listing (an IPO), it is significant that your organization follows specific accounting guidelines. Likewise, most founders are not keen on a big-company role and are only interested in start-up companies. A clear-cut leave plan assists entrepreneurs with moving their next big project.

Check Term sheet with a lawyer, other founders, or public examples:

A term sheet refers to a non-binding agreement that the founder and investors agreed upon relating to the critical terms of investment. It is being provided during an investor meeting in bullet point format. Negotiating term sheets is an annoying process simultaneously; as a startup, you will be unfamiliar with specific terms that make up the contract. Some investors may exploit inexperienced founders and make unfavorable terms in the term sheet. So it will always be better to talk with your other founders or hire an experienced lawyer to receive a suitable term sheet. With the guidance of experienced lawyers/founders, you will gain support to understand essential terms and avoid the risk of a poorly negotiated term sheet.

Agree on the Term sheet:

A term sheet is a guide for preparing the final investment agreement. Entrepreneurs and investors should not be legally responsible for acting upon the terms and conditions outlined in the term sheet. A term sheet should list the investors’ names, investment amounts, and the money to be raised. It should also clearly state the details regarding liquidity preference, investor rights and protection, restrictions on founder’s activities, and anti-dilution provision. Remember to negotiate company valuation and its methods. Minor changes in the terms can have severe effects on your startup. Likewise, there exist so many conditions to be full-filled to sign on a term sheet.  Engage a professional on the legal side to get good quality advice and do the best review for your term sheet.

Finishing the investment process is the last stage of the checklist, where new ventures choose the right investors, prepare contracts and get legal documents ready. Let us discuss each in detail:-

Choose the investors you want to work with:

In the startup stage, most founders will shake hands with the people saying that ‘he will give you the funds for your venture’  it is not a good practice because handing someone in the wrong hands will create more problems than usual and cause the rapid downfall of the business. Not all investors will fit your startup. So it would help if you chose the investor with almost importance. Here are some of the details which has to consider while selecting the right investors.

Type of the business

The initial step before picking an investor is understanding the business model or kind of business that the startup needs to embrace. Many investors have specialization in some particular industries. Therefore approaching investors who have an interest in your business proposal is significant. In that way, not only will you get the fund, but also he will guide you and provide support.  

It is a significant factor that the investor has to stand by the founders’ side and trust and believe in their idea. During the inception of any startup, ups and downs are inevitable, but good investors will not leave the startup in hard times. So the trustworthiness of investors is necessary.

Problem Solving

Startups and founders need to figure out those capable investors who have a solid network, which will prove decisive over the long run. Besides funding support at the beginning stage of any startup, they need expert advice and feedback from someone with experience in the respective fields. Finding a good investor who can benefit with funds for you and giving valuable advice can lead your startup to a significant milestone in the future.

Capacity to fund

Yes, of course, the investor should be very capable of providing you with the fund as required. It is ideal for picking an investor who is capable of handling different rounds of funding. If the investor’s financial health is not good, they will put him under tremendous pressure, affecting the new companies he invests in.  

There is no doubt that investors are significant for each startup. in any case, it is turning even more hard to pick the right one. That is why founders and startups need to complete exhaustive research and consider all the above pointers before moving toward anybody with a substantial arrangement and business pitch.

Prepare the contracts with your lawyers:

If you are going to start a venture with a partner, it is all-important to have a contract. A contract refers to an exchange of promises between two parties. Contracts may be oral agreements or handshake agreements, but it is preferable to get them in writing to eliminate misunderstandings between parties. Startups have to draft necessary contracts with investors, clients, suppliers, and employees. 

For instance: If you are a service provider, you promise to provide service to your clients, and they will promise to pay you for that service. In case if the client doesn’t pay you, you can pursue legal action against him.

The startup will not be aware of legal issues, so it’s better to hire a lawyer to negotiate the terms of the contracts. With the right lawyers, we will feel confident to move further without falling.

Get all legal documents signed

Not forming a robust legal structure is one of the most significant risks of failure for many startups. So, founders need to cover the startup’s legal documents to turn their ideas into reality. The valid legal documents/contracts to be signed include the following:-

1. Articles of Incorporation: The usual mistake founders make is failure to establish a proper enterprise in place. Generally, startups with multiple shareholders who need lower income tax bills and legal liabilities should consider forming a Corporation.
2. By-laws: To operate with minor complications, startups should develop solid by-laws. By-laws refer to a particular set of rules and principles that govern the startup’s operations. It acts as the legal backbone to ensure smooth functioning and allow a voice to everyone involved in the startup.
3. Non-disclosure Agreement(NDA): NDA is the first legal document to be signed by people who have permission to access confidential information. This document specifies details regarding who owns the data, how personal information should be handled, the time period of confidentiality maintained, and so on. It’s ideal to sign an NDA document to protect the privacy of startups and other parties (investors).
4. Shareholders Agreement: A shareholders agreement states the rights and liabilities of shareholders and defines when they can exercise those rights. The rights include the right to transfer shares, the right of first refusal, and redemption upon death or disability.
5. Intellectual Property (IP) Assignment Agreement: Intellectual property can be software, patents, or trademark. Founders, employees, and contractors should sign the IP agreement to guarantee that the startup can attract investments and avoid other companies copying your business model. With legal title to IP, startups cannot have ownership of intellectual property.
6. Employee contracts: Employee contracts (also known as offer letters) explain the terms and conditions of employment, ownership of work, company policies, expectation, and commitments for employees. This document is put in place to make employees understand what is expected from them.
7. Founders Agreement: It is necessary for startups to have multiple founders sign a founder’s agreement to avoid conflict/dispute in the future. The document specifies the founders’ relationship, work commitments, fundamental communication, and conflict resolution clause.
   
   As early as possible, Paying attention to the legal documents brings a brighter startup future and helps to stay away from upcoming legal troubles.

Celebrate with your team:

You are so focused on achieving the goals that you often forget to celebrate—after being capitalized. Success is an element of your group’s efforts, and you need to praise those efforts. Therefore, celebrate with your team because the team’s dedication helped you in all ways to gain the required funds and results. Share your happier moments with your support team. It brings motivation and encouragement among the team to work harder. Also, keep in mind that you need to encourage their positive morale as you’re going ahead.

Prepare a press release:

After receiving the necessary fund, you can give press releases to inform the public about your funding success. This is one good way to promote your startup’s creditability. The public understands how much worth your startup is and creates an overall image for your startup.

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