4 ways you can attract funding as a young entrepreneur in 2018Sanna Vohra
With many shutdowns and near-deaths in the startup space recently, raising money has become tougher for young entrepreneurs. Try these tips to get started.
There was a time in 2014 when everyone was getting funded: my neighbour, my mother’s neighbour, my mother’s neighbour’s dhobi (maybe I am taking it a little too far)…But the point is that it seemed like everyone with a half-baked idea from a semi-brand kind of school whose vocabulary overflowed with buzzwords like “hyperlocal”, “food delivery”, and “big data” was getting a cheque.
Fast forward to four years later, and that’s not the case anymore. With the shutting down of many Series A-C funded companies and the near-deaths of behemoths like Snapdeal, the funding environment has changed drastically. What that means is that raising money has become a whole lot harder for young entrepreneurs who do not have decades of experience in the fields they are trying to revolutionise.
Having gone through the process twice since 2014 for my own company, The Wedding Brigade, I wanted to share some advice that will hopefully leave you better prepared as you embark on this nebulous and stress-inducing, yet exciting journey.
Find out as much as possible about the investor before the meeting
One thing all entrepreneurs need to understand is that different investors are looking for different types of companies. For example, if an investor has historically never written a cheque lower than $2 million, do not pitch for $500K to “test your product/market fit”. Or, if you notice they have invested in a lot of content-based plays, make sure to spend time during your meeting talking about the content you have created for your consumer company, and the level of engagement you have seen. Context is king (or queen!)
Understand the key concerns the investor may be coming in with
After a couple of meetings with investors, you will notice that there are some clear trends about the kind of questions you are being asked. For example, if you majored in journalism and are starting a healthcare company, they will ask you how you will cope without a background in healthcare. Or if you are a single founder, they will inquire about why you didn’t partner with someone else, or if you are getting into a crowded space, they will ask you how you are going to compete with well-funded competitors. Rather than waiting for them to ask these questions, address them head-on in your pitch, so they know you have really done your homework. After all, the best defence is a great offence.
Have a clear and concise answer on why your company is going to win
This is absolutely crucial. If you cannot articulate why what your company is doing is significantly better than anything else in the market, an investor is not going to invest in you (for more on this, read Peter Thiel’s Zero to One). Remember, investors are looking for 10x returns in less than a decade – and if you can’t figure out how you are going to compete, the likelihood of getting those returns diminish in their eyes.
Stay in touch with your investors
This is something I believe not enough entrepreneurs do (and something I believe I can do better, too). The best way to get an investor to believe in you and your story is if they are tracking it over time. This way, they would have experienced the highs and lows with you, and will have a solid understanding of why you made key strategic decisions and how your company has grown. Hence, when you are ready to raise money, or they decide to make an investment in the space you are operating in, they will have much more confidence in your vision against that of an unknown competitor.
I feel obliged to end this with a standard disclaimer: following these steps does not guarantee you will attract funding. However, I sincerely believe they may take you a few steps closer.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)