Don’t let money stand in the way of your dreams.
Seed-stage funding has dropped from 10 percent in 2017 to just 5 percent last year as investors continue to favor later-stage investments. But, that’s no reason to be discouraged! There are so many other ways to get your startup funded, regardless of what stage you’re in!
Yes, you could always take the traditional route and pitch to numerous investors. And according to Edward Cruz, founder of Go for Vertical, this approach will get you funded 6 percent of the time.
But, before you start making appointments with stakeholders, know all the avenues available for securing funds.
Start With Discovery
No matter what your business, how much seed money you need, or how you plan on getting it, you need to start with discovering who your customers will be. You could have the best idea in the world, but if you can’t show investors that people want to buy it, it will cost you funding.
Remember, anyone looking to invest in your idea is a numbers person. They want to know if their investment makes sense, will pay off, and if they will see a return. Having researched, hard data available shows your professionalism and ultimately, wins you the funds.
So, before you even start preparing your pitch, discover who your customers are. This means asking your ideal customers directly for validation and gathering hard data on what they tell you.
Check Point: validate your idea with your target audience
Hyper-lean means that if it isn’t discovering, validating, planning, or executing, it gets put on hold for now. Lean into the idea that if you can demonstrate traction for as little investment as possible, then once you have the big bucks, you will be unstoppable. For Cruz, this means simultaneously discovering and taking actions that will help you prepare for investors.
One of the greatest resources you can bring to any funding opportunity is an outline of everything you need investors to know about your idea or product. Rather than rambling surface level about everything, focus on the numbers, the specific facts, and what you’ve had experts validate. This deliverable should be a coherent document, like the Lean Canvas, that you can quickly reference during your meeting and leave with investors at the end.
Check Point: create an outline proving you are a solid investment
Chunk It Into Pieces
Yes, you have to do all the things, including stakeholder discovery, design solutions, building prototypes, and launching as quick as possible. But, you don’t have to do everything all at once. In fact, Cruz even insists that to avoid getting overwhelmed or stretched too thin, you shouldn’t do all the things at once. Instead, focus on one step at a time, then seek validation around that step.
For example, research who would potentially invest in your idea and what they are currently putting their money towards. Then, just like you did with your ideal customers, get validation directly from these potential investors! This might mean talking to stores that might carry your product, asking your LinkedIn network publically, or pitching at your local 1 Million Cups.
Cruz highly recommends collaborating with one or two experts who can take on the responsibilities you feel insecure about, like designing your user experience or iterating prototypes. Although an upfront cost, these investments set your idea apart from the competition and take your idea to the next level!
Check Point: get the framework for your business set
Raise Based On Early Traction
Investors are significantly more likely to invest in your idea if they have an emotional connection to it, and you are most likely to evoke emotions with a prototype. Would you spend your life savings into a house that you’ve never seen in person? Even if you’ve heard a ton about it? Most people would answer: no. Investors feel the same way about your idea!
With the accessibility of website development and affordable 3D printing, investors now expect to see a prototype, not a cheap mock-up. That doesn’t mean it needs to be perfect. A prototype suggests to investors where you are with the development process, pulls attention to weak points in the design, and reveals potential risks in investing.
But your prototype will be an invaluable tool for gaining traction. If you can use your prototype to not only confirm customer interest but to secure early commitments to purchase your product, you are substantially more likely to secure funding. Plus, you then have a head start on getting your name out there!
Check Point: build a prototype
Lean On Your Community
One last thing before you start seeking out investors, make sure you’re aware of all the possible avenues you can use to get funded. There are so many more ways than just seeking out an investor, and many of them are often overlooked, making them sometimes more successful methods.
Within our Arizona ecosystem, Cruz highly suggests leaning on your community for funding. This includes crowdfunding, small equity investments, and micro-lending as just a few options you should consider.
Research which options might be best for you and your idea. Every investing avenue has its advantages and disadvantages, and some may not be accessible or attractive to you. That’s okay! You want to make sure you are doing what is best for you and your idea.
Check Point: seek investments from all possible avenues, not just investors
Thought you were ready to start seeking investors for your idea, but now questioning that? Be the first on our list to attend our next CLIMB Accelerator, a 12-week program that helps you develop your business concept, understand your market, and prepare for investors.
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