How to get funding at an idea levelPardeep Goyal
Startups are a very lucrative, easy way to make millions and get rich. When a brilliant idea boils up in your mind, just pen it down on paper. Make a fantastic business plan, financial projections, and envision how you can tap that billion-dollar market. Next, explain your plan to investors and they fund you immediately.
Wake up from your dream! Time for a reality check, my friend.
A commonly asked question in the startup community is ‘How can we get funding?’ Some people need funding after they prove a concept, while others dream of funding even before the execute anything.
The ideal time for raising funding is when you found product/market fit, that means you have some customers and they are loving your product. But still people start looking out for funding at the idea level. It is difficult, almost impossible for first-time entrepreneur.
Here are a few ways you can getting funding if your startup is still in the idea phase.
#1. Previous Startup Success
If you have built a startup in past, and have made your investors rich, then your chances of getting funding at the idea level are bright. I am guessing no such person is reading this article. He or she doesn’t need any advice and probably already has raised funding.
#2. Strong work experience in your field
Investors will pay close attention if you are a geek, nerd, expert, PhD, and have piles of research publications in your name. You must have innovation in your blood and a proven record of doing great work in your field. You may raise funding like Raghava KK.
#3. Close circle of friends & family
Of course, your dear ones care for you the most. You can reach out to everyone in your friends’ circle, explain your idea, convince them that you won’t lose their money and make them your investors. You can accept money as debt or make them partners by offering some equity.
#4. Find a naïve investor
This is an interesting one and works in reality. People have made tons of money from investing in real estate and traditional businesses. Now, they are attracted towards Internet companies after listening to stories about the WhatsApp acquisition, where investors are still counting the zeros in $19 billion, the valuation given by Facebook. If you go to such an investor, and tell him that you can make an app like WhatsApp and sell it, chances are he will take the bait.
But beware, if you make fool out of people, you will have to pay them back in some form in the future. Indians believe in karma, so think twice before taking any such action. Get investors who understand your market.
There is no other way to raise money at the ideation level. If I am missing something then please let me know in the comments.
But, that does not mean you can not raise funds. You can, but not at idea level. You have to execute the idea. Make a product and get your initial customers.
Always ask yourself these questions when you think about raising money.
- Are you starting your company to solve the customer’s problems or raise money? The answer should be ‘both’.
- Who’s your priority – the customer or your investor? Have you talked to fifty customers?
- Have you offered a solution, or even a minimum viable product (MVP)?
- How will you get customers to your platform? What have you tried and proved to acquire customers? Focus on promotional strategies like Social Media, SEO, etc. otherwise they will sound good only on paper.
- How will you make your business profitable? Don’t assume that you will figure out something on the fly. Plan for either 1000x growth or monetisation. A free platform works only when you have thousands of customers installing your app on a daily basis. At the end of the day, any business runs on profits.
Assume for a while that you are an investor. Why would you invest in a stranger’s company? An investor gets hundreds of business proposals on a daily basis. How can you shine in a pile of startup business plans?
I would suggest you at least get to work. Build something that customers love. Make a significant positive difference in human lives. Prove that your product is the right fit for the current market.
If the market is big enough, and you have a brilliant product (not just an idea) to serve customers, then funding will follow you. A true entrepreneur is resourceful. He can figure out how to make things happen even with scarce resources.