Startup Funding

Menu
Subscribe
Search
The Benefits of a Family Office

The Benefits of a Family Office

•
Fundraising, Investing

Related Guides

    Trending

    The most popular articles on Startup Funding in the past day.

    The Most Common Reasons Why Startups Fail to Raise Funding

    October 13, 2021

    1 min read There are many reasons why startups fail, these are the most common. Working with entrepreneurs every day on starting and growing their business, in addition to building a product/service that the market wants, recruiting a team that is effective, and finding customers, they must also raise funding.  A select few have the funding to start and grow the company but the vast majority of today’s startups do not.  They have to raise funding from outside sources and they know it. The most common reason why startups fail to raise funding is that they don’t budget the time or financial resources to do it.  When they ask me for help in fundraising, I ask for their business plan.  In reviewing it I find they have a time and financial budget for building the product.  They also have resources set aside for marketing and selling it. When I ask for their time and financial budget for raising funding, I often receive a blank stare. The four components of a startup are product, team, customers, and funding.  They budget time and dollars for the first three but many miss the fourth one–funding. Fundraising typically doesn’t require a lot of financial resources upfront but it does take some.  Pitching to angel groups requires application fees. Putting investor docs in order requires some cost as well.  The cost is not great but a budget of zero dollars makes it harder. The primary cost in raising funding is time.  It’s nearly a full-time job for three to six months in most cases.  Who on your team is dedicated to the process?  Closing investors is not unlike closing a customer.  You must have several interactions.  For a new company with a new product is almost never one visit and you’re done.  You have to go back and show how the product is improving.  Getting the first customer is the hardest and as you gain more users it does get easier.  The same is true with investing from investors.  If you’re starting to raise funding, I recommend you review your time and financial budget and make sure you are prepared for it. Feel free to try out our calculators and contact us if you would like to discuss your fundraise: http://staging.startupfundingespresso.com/calculators/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Five Fundraising Myths Facing Entrepreneurs

    October 7, 2021

    2 min read Raising funding is difficult for many entrepreneurs, and there are fundraising myths out there making it even harder. In this article, we plan to bust those myths one by one so that you can start raising funding with confidence. Myth #1: Fundraising is about getting the check Many entrepreneurs believe that fundraising is all about making their startup money. On the contrary, fundraising is about building a relationship with the investor. Investors start as mere contacts in your network. A relationship begins to develop through mailers and updates on your startup’s core results related to the team, sales, product, and fundraise, and your potential investor is promoted from prospective donor to a partner in your journey.  Myth #2: My product will carry the day The reality is that your product is not what carries the day- your business is. No matter how great your product is, it isn’t going to win over any significant share of the market without a strong business structure behind it. Investors will base their decision in part on your past and current financials, how much funding you are seeking out and how you plan to use it, your exit strategy to calculate an expected rate of return, and proof of market validation. Myth #3: It should only take a few weeks to raise $1M In reality, it’ll take you a calendar year for every $1M you want to raise at the seed stage. This accounts for the time it takes to prepare the company, the investor documents, and the pitch as well contacting, pitching, and following up with investors. In addition to this, investors will need to have time to complete their due diligence process. Remember, you are likely not the only entrepreneur your investor is working with, and you will need to be patient and work with their schedule. Myth #4: The investor didn’t follow up after my pitch session, so he must not be interested Don’t expect an immediate decision from your prospective investor. Investors spend the first three to five interactions trying to figure out what you are doing. To help push things to the next level, try prompting your prospective investor with the following questions: Would you invest? What number do you have in mind? Can you commit to that number? If not, what holds you back from committing? What date before the close can you commit to signing the docs and wiring the funds? You can also communicate that the following raise will be at a much higher valuation. If the investor is going to commit, they will do so for a better valuation now. Try tacking on incentives such as redemption rights, warrants, etc. Myth #5: I only need to source five investors to raise $250K You’ll need more than five investors to raise $250k. In fact, you’ll need about fifty. Don’t let this number scare you. There are many sources of capital- loans from family and friends, bank loans, revenue share loans, and equity investments in the form of convertible notes and equity ownership. Search your network for potential investors, including your contacts list and your LinkedIn connections. You can even search the web for local angel networks. Feel free to try out our calculators and contact us if you would like to discuss your fundraise: http://staging.startupfundingespresso.com/calculators/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Five Startup Cognitive Effects You Should Be Taking Advantage of

    October 4, 2021

    2 min read Five Startup Cognitive Effects You Should Be Taking Advantage of A stellar product, a capable team, and a solid sales and marketing plan are crucial to winning over investors. However, there are a few things you can do beyond this to help ensure your potential investor sees you in the best light possible. Employ these five cognitive effects to your investor pitch and see the difference. Zeigarnik Effect Zeigarnik effect is defined by Wikipedia as uncompleted or interrupted tasks that are remembered better than completed ones. Investors will remember the pitch that leaves them hanging more quickly than the ones that have closure. The cliffhanger in a serialized show is recognized because the action is left unfinished, and it leaves the viewer with an uncompleted story creating mental tension. To use the Zeigarnik effect, consider the following: In your pitch, close with a cliffhanger ending by discussing an upcoming event such as closing a big sale or hiring a great team member. Use the pending outcome as an excuse to return to the investor later for a follow-up. In general, investors are often curious about startups and how they turn out later. Use this in setting up a follow-up call by offering to give them ‘the rest of the story’. Picture Superiority Effect The picture superiority effect is a phenomenon defined by Wikipedia whereby the notion that concepts learned by viewing pictures are more easily and frequently recalled than concepts learned by viewing their written word form counterparts. Investors identify and remember more from images than words. Startups should use pictures rather than words wherever possible in the pitch presentation. Use graphics that are relevant to the content and clarify the message. When this is not possible, then the startup should use distinctive words. These are words that are descriptive and create an image in the listener’s mind. Startups should capture what they do and how they do it into mantras and taglines.  Mantras and taglines create mental images that help the investor remember what you do. Startups can also use video, animation, charts, and graphs as well. Framing Effect Wikipedia defines the framing effect bias as drawing different conclusions from the same information, depending on how that information is presented. How you frame the startup in a pitch can determine how an investor regards it. One can use framing to position a startup, so it’s more relevant to the investor. The investors are tech investors, then position the startup as a tech deal. If the investors look for recurring revenue, then position the startup based on its revenue model. If the investors are impact investors, then position the startup showing the impact it makes. By positioning the startup for the investor, you can increase your chance of aligning with it. Also, by framing the pitch to show the accomplishments of the startup rather than the work left to be done, one can position the startup as successful and on track rather than falling behind. Use framing to put your startup in the best position to connect with the investor.  Humor Effect Wikipedia defines humor effect as humorous items that are more easily remembered than non-humorous ones, which might be explained by the distinctiveness of humor, the increased cognitive processing time to understand the humor, or the emotional arousal caused by the humor. Startup pitches with humor are more memorable than those without. Founders should include humor into their pitch as investors will more likely remember it. Humor also puts a positive spin on the pitch as it removes negative feelings from the investor. It energizes and increases the interest level of the investor in the subject matter. It improves the investors’ perception of the founder as someone friendly and approachable. Humor increases learning ability by telling the investor what they want to hear and following up with what they need to know. Finally, it’s crucial the humor be positive and appropriate and not come at the expense of anyone. Testing Effect The Testing Effect is defined by Wikipedia as the fact that you more easily remember information you have read by rewriting it instead of rereading it. Investors remember that which they recall from memory better than just hearing the pitch again. This comes from research showing that taking a test that requires writing out a response improves retention better than just rereading the material, which moves the information into long-term memory. Founders can use the testing effect by asking investors questions about the pitch to exercise recall. For example, ask the listener: ‘Remember the problem we are solving?’. Give them time to recall it. If they don’t respond promptly, then answer. This avoids the awkward silence that can arise.  During the Q&A portion, engage the investor in a dialog that recalls vital points such as the problem you solve, the solution you offer, and the traction you have. This will help the investor remember your deal better. Feel free to try out our calculators and contact us if you would like to discuss your fundraise: http://staging.startupfundingespresso.com/calculators/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    5 Investor Questions You Should be Able to Answer

    September 21, 2021

    2 min read Securing funding is one of the most difficult and yet most important aspects of launching your startup successfully, so what investor questions should you prepare for? Before diving in, investors are going to want to do their due diligence and ensure that your organization is worth the risk. Before you approach investors you should know enough about your startup to answer the following five questions. What is your value proposition? This is the feature that makes your product or service stand out from the rest. The answer points out what your company provides, and why people want it. Will customers pay for the solution? Free usage is not hard to achieve- but the ability to secure paying customers is required. Investors want to know if customers will pay for your solution, therefore producing a profit to be shared. Who is on the team? About half of an investor’s decision comes down to believing in the team and knowing they will be enough to reach the goal. The team should be able to tell who is in charge of what business functions, for example, marketing, sales, R&D, etc. Why is now the right time? Is there anything in the deal that suggests now is the right time to start this business?  Why hasn’t someone done this before? Showing that there is a current need to be filled, problem to be solved, or demand to be met is necessary. What is your exit? This is one of the hardest questions to answer. If you need or choose to exit, what will this look like, and how will the investor get their money back? There you have it- the top five questions a startup needs to be prepared to answer when meeting with a prospective investor. We suggest typing the answers to the above questions out so that you and your team are fully prepared! Feel free to try out our calculators and contact us if you would like to discuss your fundraise: http://staging.startupfundingespresso.com/calculators/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    10 Reasons an Investor Will Pass on Your Deal

    September 12, 2021

    2 min read  Investors see many deals and can spot glaring holes immediately. Here are ten main reasons an investor will pass on your deal: No Traction. You need to show some evidence of market validation. Even without a sales team and a marketing budget, there should be some demand for your product. No Social Proof. There needs to be some evidence the product works. The Team Doesn’t Fit. If there are major holes in the team or you’ve filled the secondary roles and left the primary ones empty, then it’s going to be a problem. Criteria Don’t Fit. Many funds are clear about what they invest in (SaaS, Healthcare IT, etc). Your deal needs to fit into one or more of those criteria. You Don’t Know Your Market. Those with a vague or fuzzy knowledge of the market or customer will have difficulty raising funding. The ability to site numbers (market size, growth rates, customer spend, etc) helps demonstrate your knowledge. Financial Projections Don’t Add Up. Some startups use the excuse that they can’t predict the future and therefore they have no financial projections. Most investors see this as a lack of knowledge about the business and the market. Fuzzy Business Plan Some plans are filled with future possibilities and great opportunities but fail to define the core product and how it will be built and sold. Investors can spot a lack of focus on the business plan a mile away. No “Use of Funds”. The phrase “I’m raising $1M” often triggers the bull meter because the fundraiser rarely knows how they’ll apply the funds. No Validated Business Model. There’s no evidence of a business either in product or customer activity. Lack of Follow-Up. Surprisingly, an investor will express interest and then never hear from the entrepreneur again. It can take several follow-ups to close an investor. TEN Capital has created a series of calculators to help you see how your startup compares to industry standards. You can discover if you are ready for funding, see how your deal will be seen by investors, learn how to set the price for your next raise or exit, or calculate how much TEN Capital can save you on your fundraising campaign. Feel free to try out our calculators and contact us if you would like to discuss your fundraise: http://staging.startupfundingespresso.com/calculators/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Finding Funding

    March 1, 2021

    2 min read Finding Funding: When and How Your Startup Should Look for Investors. If your startup is beginning to gain traction in your market, yet you feel held back by lack of capital, you may be wondering if it is time to start your first fundraise campaign. In today’s article, we will talk about how to gauge whether or not you are ready to source funding for your organization, and if so, where to look for it. Are You Fundable Yet? I talk with entrepreneurs every day about their fundraise. The most common question I am asked from those running early-stage startups is: “Am I fundable?”. My initial response is always to find out whether or not they have a growth story. For starters, are things clicking forward on sales, team, and product development? If you can answer those questions with substance, then you are in the game to consider funding. It doesn’t matter where you are on the journey; you just need to show you are making consistent and meaningful progress. What’s Your Trigger? When launching your startup, look for a trigger that indicates when to start your fundraise campaign. Common triggers include: Closing a lighthouse customer account or achieving a revenue target Signing up a new team member or advisor Finishing a beta version of your software or an MVP version of your product Closing funding from a lead investor In short, investors look at sales, team, product, and fundraise as the four core areas for progress. When you achieve a milestone in one or more of these areas, it can be considered a trigger to consider launching a fundraise campaign. Remember that when approaching an investor, you should have a milestone completed AND a milestone to accomplish. Where to Look for Funding I’m often asked where startups should look for funding. Luckily, there are many sources. First, start with your family and friends. These are the people who already know you and believe in you. Second, expand the circle to include current and previous coworkers. If accelerators are appropriate for your deal, then consider those not only in your geographical area but also in your sector. Most accelerators take companies from across the country. Many are now offering funding of $150K or more. Third, look for a local network of angel investors or family office investors in your area. These are high-net-worth individuals who have organized their startup investments into a formal process. Finally, you can approach venture capital. This option is only applicable if you have a deal that fits the VC funding model, which looks for a 10X return, scalable business model, healthy growth, and an experienced team. It’s best to start with those you know and use their funding to show support and momentum to those further out in your network. There are tens of thousands of investors in the startup world today. The key is to gain an introduction, make a pitch, and then follow up to close. How Long Will It Take to Raise Funding? I’m often asked how long it will take to raise a round of funding. It will generally take you one calendar year for every million dollars you are raising if you are working on it full-time. If you are only working towards your fundraising goals part-time, then it will take you longer. You’ll need approximately two months to prepare for the raise. This preparation phase includes preparing the company, the investor documents, and the initial investor list. It takes another 2-3 months to engage investors and bring them up to speed on your deal. They’ll want to monitor the startup for a few months to see the traction in motion. Finally, it takes about a month to close. After you close those investors, you’ll need to find another round of investors and repeat the process. For a million-dollar raise, you’ll need to do repeat this process three times on average. Some companies don’t need all of their funding in one go. Companies based on recurring revenue have the option of growing incrementally and can raise funding incrementally as well. Read more in the TEN Capital eGuide: http://staging.startupfundingespresso.com/running-a-fundraise-campaign/ Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

    Site Map

    Scroll to Top