Investors

Dodge These 5 Mistakes When Seeking Startup Capital

Getting a business financed is tough. As many as 27% of businesses claimed that they failed to receive the funding. Are you one of those? If yes, then this blog is for you and for anyone who wants to succeed in securing startup capital.


Startups never have it easy. Their journey is an arduous and painstaking one. Of all the various challenges they have to confront, the most challenging one strikes them in the beginning – that of acquiring startup capital.


Depending on the capital needs, a startup will find many options on the table from Loans, venture capitalists, Trade credit from suppliers, to line of credit and so on. There are obvious risks attached to almost every form of funding method. Your success depends on the ability to do the basic things right and in avoiding the mistakes that contribute to failure. Following are the 5 mistakes along with their solution:

1. Ascertain The Accurate Capital Requirements

Knowing the exact capital requirement is quite important before you pay a visit to the investors. Entrepreneurs like to think that if they ask for a smaller amount, they’ll have a better luck in acquiring it. Sounds good in theory, but this approach backfires in two ways: Firstly – investors will see that you’ve clearly undermined your startup’s capital requirements and would simply decline your request by assuming you’re not serious about it.


Secondly, even if you do succeed in acquiring, there’s every possibility that you’ll run out of money in little or no time. At this point, you’re looking at a very dire scenario possibly threatening your business’ survival.


So it’s always better to accurately estimate your capital requirements and then make a solid pitch to the investors. They’re more likely to consider your application when you ask for a valid sum of money.

2. Value The Equity Share

A larger share of equity always draws investor’s interest in. There’s always the temptation to give away more equity than you should just to get your startup financed. But you’re better off resisting that temptation.


Startups are always tricky and you never know what circumstances may arise in near future. Imagine a scenario where your startup doesn’t go as per plans, and you begin to incur huge losses. As the normal business operations begin to suffer, you may turn to further financing. That will just shrink your ownership share to the bare minimum. That’s why as an entrepreneur you have to value the equity and carefully approve a reasonable share to the investors.

3. Personal Credit-Card To Fund Your Startup

Thinking of funding your business with your personal credit card? Well, our humble advice would be – think again. Even if you have an all impressive credit card rating, there’s no reason to fall prey to the ‘worst-case scenario’. Credit-score is just a rating provided by your credit-card issuers and is in no way indicative of whether or not you’re capable of funding your startup. Studies have shown that people who bank on credit card financing eventually end up in failure.


That’s why piling up credit as you attempt to realize your startup’s vision isn’t a good idea. Should you fail, your personal finances could take a major blow and you won’t have any means to pay back the dues.

4. Be Wary Of Advance Fee Loan Scams

We’re all aware that there’s been a surge in the number of people seeking funds for their start-ups. That’s where some of the scammers have attempted to cash-in. With Advance fee loan scams, entrepreneurs are guaranteed to get necessary funding irrespective of their credit history.


How these programs work is quite interesting. They initially ask for an upfront fee and once you pay that out, you’re required for the loan to be approved – well in truth, the loans never really happen.


The Governments around the world try to keep a close check on such programs, but still, the surreptitious manner in which they work, some people do end up falling victim to them. So you have to be ultra careful with these scams, and if you happen to get a hint of any suspicious activity, you’re required to report them to the security agencies.

5. Don’t Underestimate The Cash-Flow Analysis

Investors often take a keen interest in cash-flow statements and for good reason. They want to know how you’ll use the money lent by them. So you have to present a detailed summary of every pound and penny and where it’ll be spent in the daily business operations. Investors like to see you have a firm grip on everything.


Should they see you’re unsure at any point, their decision to grant you the loan could be affected. Furthermore, it’s not very prudent to consider faking a cash-flow analysis. The more ambitious your idea, the more answers you’re likely to have up your sleeves come the face-to-face time. So analyze everything and make an authentic cash-flow analysis that really convinces investors to help you up with the funds you’re seeking.


Capital-funding is a ‘big deal’ and it’s something a business-owner has to prepare him/herself as best as they can. Knowing the aforementioned pitfalls should prove useful as you get ready to make a pitch to the investors.

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Little Known Tips to Become a Triumphant Entrepreneur

A lot of entrepreneurs are still seeking the path of success and struggling to get investors. This blog throws light upon the common mistakes that an entrepreneur commits while seeking investment. It further offers some useful tips that need to be followed to become a successful entrepreneur and to grow business.

How is your product solving market’s problem?

Young and budding entrepreneurs (also the experienced ones) offer solutions to issues and problems which do not not exist in the real life scenario. Most of the entrepreneurs limit their thought process and offer solutions to problems faced by them on personal front. They wrongly presume that every individual need answers to this common problem. But they need to pop their solve the problem that the market is facing then nobody is going to buy your solution. Forget about consumers, it would be very hard to even convince investors to put their in money in your dream solution. It is very unlikely that everyone has same problem for which they are seeking an answer.
product solving market’s problem
The best approach before developing any product or solution is to have an in depth market research conducted with the help of surveys or questionnaires and connecting with as many people as possible to discuss their problems. Free survey tools can also be used such as – SurveyMonkey and Zoho Survey.

– Product planning surveys offers insider knowledge to plan a new products, growth in business and success in today’s competitive marketplace. (Source)

– It is easy to track consumers’ attitude towards the product by conducting surveys in regular intervals. (Source)

– Surveys are quick, affordable than any other technique of data collection and are easy to administer. (Source)

Based on the problems they encounter, you should build up an ideal solution to it. You don’t have to be bias as entrepreneurs in framing questions that will give you the favourable answers. The assistance of professionals and focus group in preparing survey questions will be beneficial for entrepreneurs to know the real thoughts of people.

What is the size of the market of your product?

For having a fair understanding of your market and its size, an entrepreneur has to be keen on their target market and audiences. Factors such as – age, geographics, psychology, demand, psychographic etc play a vital role in figuring out your market’s size. The best approach is to target niche markets which have not been served or are underserved in the industry. This is the most convenient and affordable strategy to gain traction. Your product should reflect credibility to the market and also about its size. The share that entrepreneurs are willing to obtain from the market also needs to be realistic.

 size of the market
To impress your investors and to get investments from them – you must have realistic stats and pragmatic approach about your product and strategy. Vaguely presenting your stats to investors is a big turn off and they are just not going to buy your idea.

How much Revenue will your product earn in present and in future?

The ugly truth of today’s time is that creation of business is pretty easy but establishment of a long term business with sustainable solution is very very difficult. A business which calls for lumpsum investments from investors needs to have a clear vision, approach, tactics and long term planning. This area of consideration requires not only how an entrepreneur is going to earn revenue from their product but also needs to pay heed to the fact that how they will plan the long-term growth of the product..

Revenue will your product earn
Will your product be sold at a full price down payment or will it be subscription based – an entrepreneur should always be prepared to answer these questions. If an entrepreneur’s approaches its investor with a full proof plan, then only the chances are high enough that an investor will buy your idea. If you don’t have the plan ready for next 10 years, at least you need to show some confidence in your idea.

What are your obstacles in your target market?

An entrepreneur should learn about the possible barriers of their competitors and the hurdles they is going to face as a new market entrant. It is good to be prepared beforehand and to be defensive. Even though your strategy or product would be really good, but it needs to have that ‘X-Factor’ that makes it worth the purchase. Your idea has to be very protected, as an investor would not like to put their money on something that would fail to defend itself.

 obstacles in your target market
How to execute your idea?

Execution is the only matter of interest to investors once they are updated with realistic market size. An entrepreneur has to have a proactive team that can execute their idea with ease and create some value for their brand.

For this even if an entrepreneur has to build a minimum viable product for the sake of acqui0ring new customers and retaining the existing ones, they should do it.
MVP
As for investors this MVP will be a sustainable long term approach for getting their money out. An entrepreneur should extol their knowledge, skills and experience and those of their team.

How to enable Investors achieve Liquidity?

Investors are not going to wait for their lifetime to get the desired return on their money. The entrepreneurs however, get into business with the view of making it sustainable and to make it run long enough. No investor has this much patience and time. If an entrepreneur is looking out for investment capital, then they should be prepared to deal with the reality that within the time span of next 5 or 10 years either they would have to sell their company or ask other investors to join in. The possible solutions for this are – merger, acquisition, or initial public offering.

 enable Investors achieve Liquidity
An Entrepreneur should not build a product just with the aim of making money and getting huge returns. Investors in today’s time are very conscious about putting their money in a product that will be beneficial to public and mankind. Knowing your company and product inside out is one of the positive attributes that every investor appreciates. If you managed to lay positive impression on an investor, then their decision of investment in your idea may be doubtful but they will be quite impressed with your insight about product and will definitely be willing to help you.

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