At Entrepreneurs Collective, we work with start-up fundraising founders every day to come up with growth plans that actually work. Here are some of the most common (and easily avoidable) mistakes that you can make when you are fundraising for your startup.
Biting the wrong apple
Are you looking for VC investment when really angel syndicate investment would work much better for you? Start-up fundraising comes in all shapes and sizes, and you need to have your growth plans and possibilities in check before you decide on a specific direction to go in. Be practical in your goals for the future. Back everything you are saying up with facts that support your business. You can also end up hitting the market for investors sooner than you ought to. Start-up fundraising activities are only feasible once you’ve done things like pre-fundraising networking, risk assessments, scalability assessments, etc.
Start-up fundraising and planning
Don’t just get money to keep the business running smoothly; make sure that you are also accounting for any expansion or growth. Your business should always evolve as you work. No product or idea can stick around forever. Think of what the future looks like and make sure that your start-up fundraising efforts actually take that into account. This doesn’t mean you should ask for double the money, but it absolutely means you should outline your plans to your investors.
What are you losing?
An investor won’t give you money unless they get something in return. At times, founders are so desperate to get their dreams funded that they don’t consider what they are giving up in exchange for the money they are getting. You may end up giving away too much equity or control, which can come back to haunt you later. Think of what you’re putting up for offer when you look at start-up funding options, and make sure that you don’t compromise on your core principles.
Start-up fundraising and networking
Are you talking to the right people? Are you in a space that can make your start-up fundraising dreams come true? Before you end up looking for someone who can give you their money, look for mentors who can really talk you through the steps needed to make it work in the industry. At times, founders can go guns blazing into the investor pool when they should have done more homework. This is a key mistake that you should avoid making, and it’s a fairly easy one to make too. Ironically, if you’re doing mentor shopping before investor shopping, you’ll end up inadvertently networking with the right people. You can check out our pitch competitions page to help find your way into an investor’s heart.
Do you even need it?
Is your problem solvable with a bank loan? A lot of times, founders are told never to take on risk themselves, but the truth is that we promise a lot to an investor when they come on board. Does your startup funding need something that requires heavy investment, or is it something that can be done with just a liquid injection or small buffer? As we mentioned earlier giving away too much equity in your early days could come back to bite you later. These are hard questions that you need to sit down and ask yourself long before you get to the point of signing the dotted line.
Start-up fundraising can be a rewarding process, but only if you’ve done all your homework. Don’t go into it blind hoping for a bit of luck; play it smart and go the practical route.