Raising an initial round of capital for your early-stage startup can be overwhelming. So we’ve created a quick list of tips for entrepreneurs looking to raise funds from the crowd to keep you focused, realistic and ready to succeed. Here are seven tips which will help you raise the funds you need to grow your business.
Tip 1: Set attainable milestones
Rather than setting one large goal far off in the future, set yourself several, smaller milestones which need to be reached to drive momentum. Initially, it will be easier to raise money for the first one or two milestones. This will allow you to demonstrate the progress that you need to entice later-stage investors and achieve incremental increases in your valuation.
Tip 2: Work out how much money you really need
Approaching fundraising without a clear idea of how much money you are looking for can be problematic. Instead, work out how much money you really need in order to reach the next relevant milestone and aim to raise only that amount. Remember that raising too much money too soon may mean that you give away more equity than you want, so think about the amount you need to reach your initial milestones, carefully.
Tip 3: Be realistic about equity expectations
For seed rounds of around £100,000, investors will usually expect to receive around 20% of the equity in your company. Investing in early-stage businesses can be one of the highest risk ventures for investors, and while we know that these types of investments provide a tremendous opportunity for investors, the valuation that you place on your company must reflect this risk.
Tip 4: Do your research
Research is key. You should know as much as possible about the market you’re looking to enter, competitors (direct and indirect) and any hurdles that you will need to overcome. Even an early stage startup should be able to answer detailed questions about their business and the market that they are looking to operate in.
Tip 5: Risk does not always equal greatness
There is a misconception that you have to be a massive risk taker to be a successful entrepreneur. There is a big difference between taking a calculated risk and being reckless. So, be sure that the risks you take are measured and lay the foundation for the kind of business that you want to run.
Tip 6: Avoid excessive salaries
Especially if you’ve quit your day job and are working on your business full time, you’ll need some money to live on. But, don’t expect to take a large salary from your startup, as this will put many investors off.
Tip 7: Get creative with marketing
Harness the power of social media, professional contacts, your investors, your team, local politicians and current users/customers to spread the word of your startup organically. The most important part of succeeding at crowdfunding is being able to tell people about what you’re up to.
If you’re considering fundraising for your business, take a look through our current campaigns to get a better idea of what it is you should think about for your pitch.
