Even the most game-changing business idea won’t fly on a wing and a prayer—sadly ideas aren’t currency, however visionary they happen to be. Before your startup can truly soar, you need to work out a way to fund it.
There’s no doubt that securing startup funding can be one of the most difficult tasks faced by tech founders — Jess Ruhfus, founder of online collaboration marketing platform Collabosaurus, says “securing funding in Australia is one of the longest sales processes you can go through!”
And without a reliable source in place, many startups struggle to achieve significant traction, market or develop their products, not to mention hire talent and grow their business.
So, how can you secure the funding?
The good news? There is money out there. We’ve rounded up five key things to consider when seeking funding.
1. Before $$ flow, keep it lean
Keeping costs low is a basic business principle 101, but it is even more critical when you are a pre-revenue tech startup. Don’t get swept away by your global vision before finding revenue for major financial commitments.
Harris Meitanis, founder of The Event Ecosystem, says it’s all about being resourceful in the beginning.
“Don’t hire contractors too early, in terms of functions such as PR and marketing,” says Meitanis, who recently launched blockchain-based talent booking platforms A.C.T.A and G.E.T.
In just six months, A.C.T.A has attracted A-list talent from Molly Meldrum to Megan Washington and the platforms are game changing the event and entertainment industries.
“Learn to do this yourself when soft launching. If anything, find a good team to help in driving leads via digital advertising such as SEO, SEM and SMM, but look to create your content and manage socials and communications in-house to keep your early costs down.”
2. Laser focus on revenue
There is a saying in the startup world: “if it doesn’t get you traction, it’s a distraction.” Make it your daily “distraction” — focus! — to nail your first revenue.
This is an attractive sign for investors — and focus is an investment itself these days.
Ruhfus says it’s all about balance.
“Your company’s sales and growth while you’re fundraising is frustratingly important. Find a balance that works for you so that you don’t let growth slide,” she says.
“Investors want to see a growth trend, which is always really difficult to maintain when you’re spending so much time raising capital, especially with a small team.”
3. Grow and nurture your network
Every conversation is an opportunity. You never really know the source of your next investment. And while you may not see the fruits of your networking immediately, have faith that your persistence will grow your network in the long run.
“It’s important to begin building relationships with potential investors, advisors, mentors and customers well before you decide to kick start a funding round,” says Ruhfus.
And remember that you already have friends.
“Start with the people you know: friends, family, your professional network,” says Meitanis. “This will not only help you get started, but will also give you the learning to start to move onto options outside of your network.”
And your enthusiasm will be infectious for all your networks. “Confidence and complete belief in what you’re looking to achieve is an absolute must,” says Meitanis.
4. Know your numbers — and market
Persistence is one thing, but you also need to know your stuff.
Financial projections is one essential area of focus for tech entrepreneurs.
Get to know the fundamentals of a financial spreadsheet — start by downloading a financial projections template (there are plenty online) and customise it for your business well before you start meeting investors.
And then there’s your competitors. “You need to deeply understand your market—look at size, competitors and growth,” says Meitanis. “Spend time building your business model. Accurate numbers are everything. Be meticulous.”
5. Seek legitimate feedback
If you find yourself being knocked back time and time again, Ruhfus recommends seeking legitimate feedback from investors, while also remembering that not all advice is golden.
“If you feel that an investor has said ‘no’ without a clear reason, don’t be afraid to ask. Sometimes, there is a deeper issue as to why an investor isn’t interested,” says Ruhfus.
“I get the line ‘it’s a little early for us’ all the time. So, I push for exact metrics that the investor needs to see before we become an attractive investment.
“Everyone has an opinion, and raising capital is not for the faint hearted. Be careful whose advice you take. Logically distinguish between advice that comes with the right intentions, grounded in relevant experience, with those opinions that are not,” says Ruhfus.
Costa Koulis and Kirsten Kore are the founders of Designerex, a peer-to-peer designer dress sharing platform. Founded in Australia in 2016, the platform launches in the US in April, 2019.