“When you find an idea that you just can’t stop thinking about, that’s probably a good one to pursue.”
— Josh James, Co-founder of Omniture
Launching a startup?
Okay, so there’s good news and bad news.
The Good News: Gathering business intelligence, extending your marketing reach, and researching financing options has never been easier. You can start a business with little more than a dream, a laptop, and an internet connection.
The Bad News: 9 out of 10 startups will fail.
Yes, this makes for fairly grim reading — but don’t panic. A marketable idea, drive, and smart decision-making can all help shape your success.
However, you need funding to nourish growth. And it has to be enough to actually bring your products and services to market. Any individual, business, organization, or lender investing in your startup does so in order to see a positive return on their investment.
So, how can you develop a funding strategy for your startup and keep investors happy?
We have tapped into our years of experience working with startups and have laid out for you what we think are the top three ideas to make success happen:
1. Get the Right People On Board
One of the key factors to consider before you start pitching your startup is a strong team. It lends your concept credibility, shows you’re serious, and demonstrates your ability to lay the essential foundations for business success.
This may be difficult, depending on the type of experience you have in owning or managing an enterprise. If you already have money in place to pay people you bring onto your team, a clear business plan, and a provable history of being a responsible leader, you’ll find securing the best candidates for your startup to be much easier.
Without any of these, you’ll obviously struggle to put a team together before you can start doing the rounds for funding. In that case, you can improve your chances of winning employees’ trust and investors’ cash by working with a seasoned professional who is able to champion your startup and leverage their credibility.
They should be someone who has valuable experience driving a business to success, managing a team, liaising with people at all levels, and adapting to their niche. They also have to believe in your concept-in-product-fit (and its marketability) enough to join your enterprise at such an early stage.
They will essentially fight your corner during investment meetings and sell the startup’s potential in a way that you may be unable to without the hands-on experience of seeing a business concept from a different perspective.
2. Look at All Available Funding Options
Another reason for launching a startup can be easier for driven entrepreneurs today is the exhaustive range of funding options available.
This includes the proliferation of crowdfunding platforms. GoFundMe, Indiegogo, and Kickstarter have all empowered multiple startups with the backing to bring products or services to market — all thanks to consumers taking on an investor’s role.
Creating a crowdfunding campaign could work if you believe your product or service has a well-defined and distinct audience and you know exactly what steps to take once the money’s in your hands.
User/customer-centric products are better suited to the crowdfunding route: Just look at the Oculus Rift. This one exceeded its $250K goal and generated more than $2.4M in investments within a staggering 24-hour period. The rest, as they say, is history.
You might not have a product or service that carries the obvious mass appeal of a well-designed VR system set to revolutionize video gaming, but any concept that promises to improve lives in even the smallest ways can capture the public’s imagination when it’s presented in the right fashion.
If you're inspired by the success of crowdfunding campaigns and want to invest in innovative companies, consider using SoFi Invest. This platform offers a range of investment options tailored to suit your financial goals and risk tolerance, allowing you to diversify your portfolio and potentially benefit from the growth of businesses that have successfully leveraged crowdfunding.
The Value of Market Research in Funding Options
“Your most unhappy customers are your greatest source of learning.”
— Bill Gates
Conduct your own market research to validate your ideas and present your investors with hard data supporting your startup’s potential.
Gauging opinions and gathering feedback from your target demographics can lend your pitch a great deal of credibility. It also enables you to create an MVP (Minimum Viable Product) as part of a Lean approach, designed to prove your concept and secure early custom.
Feedback from this can then help you finalize a customer-focused product ready for a wider, more diverse audience.
However, don’t just go for the “coolest” or latest funding option because an entrepreneur you admire did the same. Don’t be afraid to approach anyone and everyone you believe could finance your startup.
A traditional bank loan or a business cash flow loan could be exactly what you need — or a grant from a local organization or corporation. And if bank loans aren’t available, you can check out SBA loans; sba loan rates could be lower than other financial products, so they’re worth a look. Even relatives looking for an investment opportunity may help.
For example, Incfile has an entrepreneur funding program that offers grants to students and new business owners.
Remember, a fundamental aspect of securing funding from any investor is focusing on what’s essential. Don’t overvalue your startup just to make sure you can afford a lavish three-week vacation or upgrade to a new sports car.
Again, a Lean and agile model streamlines your processes to get your startup set up in the shortest time.
3.How to Keep Investors Happy and Satisfied
Your investors have every right to worry about their money and stress over your startup’s performance. Even just being out of contact for longer than they expect may be enough to make them wonder how you’re managing the business and their investment.
So, to help calm those choppy waters, we have a few ideas:
Keep in touch with your investors: Update your investors on every key development in your startup, no matter how small; record your progress to prove you’re committed and spending money wisely.
Be transparent: Run into a roadblock? Worried a hiccup will put your investors off? You have to be 100% honest with them, even if you don’t have a solution in mind. You all want to see the startup succeed, so there’s every chance they’ll do whatever they can to help.
Welcome feedback and opinions: Be humble enough to invite thoughts and ideas from investors, even if you don’t incorporate them into your strategy; they’ll feel more valued and involved, strengthening their connection to the business.
Don’t think investors only care about getting a return (though that’s an obvious priority)? That means they invested in your startup because they believed in you, the product/service, or both. Take full advantage of their experience, insights, and connections.
Never lie to them, make monumental decisions without informing them, or fail to respond to their communications. These mistakes will only alienate them and risk them pulling their support.
Developing a funding strategy for your startup and finding ways to satisfy investors can be incredibly daunting for any entrepreneur, even if this isn’t your first business.
But investing time, effort, and all available resources into preparing as much as you can will give your startup the best possible chance to succeed.
Make sure you understand exactly who your customers are, the problem that your product or service solves, how your concept is better than anything else on offer in the market, and how you plan to generate a positive ROI on the funding provided.
In our world of UX and product design, what makes a business stand out from the crowd is the quality of the storytelling. Along with design, communication is a powerful sales tool for the right audience. Use your startup story, background, and "ups and downs" to generate audience engagement.
Thanks to our strong marketing background, user testing, and behavior analysis, we can convey products' real unique selling proposition (USP) and value for your users. So, don’t think of it as selling, think of it as solving a problem.
Make it easy for investors to say yes. Make it impossible for them to say no.
Get in touch if you want to dig deeper into our experience of helping startups achieve their growth goals.