There are a lot of challenges an entrepreneur faces in their startup journey. But fundraising is the biggest of all those challenges. It is studied that more than 70% of the startups and small businesses made use of some form of fundraising to make it to the market.
Raising funds for your startup is certainly difficult. A lot of great ideas do not see the light of day due to insufficient funds. But, guess what? There are also investors who are always on the lookout for captivating ideas. Wondering how to reach out to them and convince them?
In this article, we’ll discuss different fundraising options and practical solutions to raise funds for your product from multiple sources.
So, what’s in store for you?
- Here’s how to raise funds for your product
- Identify An Angel Investor For Your Product
- Raise Funds Through Venture Capitalists
- Leverage Crowdfunding Campaigns
- Bootstrapping as a fundraising option
- Alternative fundraising options
- Bank loans
- Credit cards
- Friends and family
- Business incubators and accelerators
- Partner financing
- How to impress your investors at first glance?
→ #1 Identify An Angel Investor For Your Product
Angel investors refer to wealthy individuals with surplus cash who have a passion for strengthening new business ideas through their investment. They are always on the lookout for promising businesses and product ideas that are worth investing in. Companies like Google and Yahoo who are industry giants today raised their funds through angel investors. Here are a few more insights on choosing angel investors as the source of your funds:
→ Angel investors also function in networks to screen the proposals before taking a call.
→ Platforms like Funding post and Angel capital association help you connect with angel investors.
→ Besides helping with funds, they also provide mentoring from their experiences of bankrolling multiple products and startups.
→ A foolproof and solid business plan is essential for a great pitch. You should impress your potential investors with your clarity on the mission and vision of your product.
→ #2 Raise Funds Through Venture Capitalists
Just like angel investors, venture capitalists are also people with the money and the mindset to invest. But they prefer to invest in more refreshing and groundbreaking ideas that have a high potential for monetary returns and growth. Here’s more on how venture capital works:
→ Venture capitalists also expect a share of equity in exchange for the money they invest.
→ Besides bankrolling your project, they also want to have a say in the direction of the company.
→ Since they want returns on their investments, they tend to keep close tabs on how you exhaust their funds and work towards reaping the returns.
→ #3 Leverage Crowdfunding Campaigns
Crowdfunding is one of the newest fundraising trends that has started gaining popularity. In recent years, many crowdfunding websites and communities have been created to help aspiring entrepreneurs connect with the like-minded general public and raise funds from them directly.
Here is how crowdfunding works:
→ Entrepreneurs post about their business idea, product, or solution. This includes their goals and other details like how they envision the future, the problems they are trying to solve, and how their product will help the community.
→ People who find the idea promising and convincing volunteer to contribute funds to the business.
→ The mode of contribution may be direct funds, pre-orders, offering loans, etc.
→ Indiegogo, Kickstarter, RocketHub, Fundable, and Fundly are some of the crowdfunding platforms that are popular among entrepreneurs and investors.
#4 Bootstrapping As A Fundraising Option
Bootstrapping refers to raising funds through one’s own and known sources. This option works for products that initially require a small investment. Here’s more on bootstrapping:
→ When you scale your business later, investors consider this as a positive point as your own investment shows your commitment.
→ Investing your own money involves risks to some extent, but if you are conscious about how you convert the investment into fruitful results, it’s totally worth it.
→ One of the benefits of investing own money is its 0% interest rate. Also, you are more committed to work harder and see results faster when the investment is from your wallet.
Alternative fundraising options
Here are a few other ways to raise funds for your product:
→ Bank loans: This is one of the traditional methods, yet a structured and reliable source. If you have a good credit score, it’s easy to get bank loans.
→ Credit cards: If your pre-approved credit card has enough limits, you can easily avail this option. You can use this at the very early stages of your business until you find sources for more funds.
→ Friends and family: If you are able to make your close ones buy your idea, you have the privilege and flexibility of low interest rates and long repayment tenures
→ Business incubators and accelerators: Leverage business incubator and accelerator programs that happen in the major cities. Incubator programs work for products that are at a very early stage, while accelerator programs work for products that are in their growth curve.
→ Contests: There has become an increase in the number of business plan contests and MVP competitions that you can take advantage of. Another side benefit of winning such contests is the free media coverage and PR.
→ Microfinance: This refers to assembling funds through alternative sources if conventional bank loans don’t work for you. For people with low credit scores and those who don’t fulfill the bank’s eligibility criteria can avail of this source.
→ Partner financing: This refers to a scenario where a bigger brand partners with you and arranges funds to you in trade for access, distribution rights, or priority shares of your product, service, or business offering.
How to impress your investors at first glance?
Here’s what Sequoia Capital, a leading venture capital firm advises on how to present to the investors:
→ Impress and convince within the first five minutes of your presentation
→ Use the first five minutes to convey the main reasons that will make the investors fall in love with your idea
→ Make use of the first three slides of your presentation effectively
→ Slide 1: In the first slide, explain what’s the industrial shift or dynamic change that necessitates and motivates you to create this groundbreaking and new product.
→ Slide 2: Feature a one-sentence explanation of what your product is all about and how you want to capitalize on the big change mentioned in the previous slide.
→ Slide 3: Use this slide to list the key metrics for your business plan and what exactly you are looking to raise.
→ These three slides should clearly set the context on how the investors should look into the rest of your presentation.
If you are curious to learn more about fundraising and explore further options, here’s a chance for you to get a free consultation with our product experts. Write to us at email@example.com. Siam Computing has helped hundreds of businesses to transform their dreams and ideas into stunning products. Get in touch with us for a free walkthrough of our product development services and solutions.