5 Mistakes to avoid in your startup fundraising

5 Mistakes to avoid in your startup fundraising

Like any other thing that has a stepwise procedure to move forward, fundraising is something that works the other way round. You might spend your time watching videos of 100s of pitches you can present to investors from whom you would be fundraising for your startup. But still, there is no sure-shot pitch that guarantees that they would be investing in startups.

However, in cases when you are not so certain about the do’s of something, focusing on avoiding the mistakes and the don’ts can be the next best thing. Investing in startups is a big decision from the investor’s side of the table, while fundraising for the business is equally crucial for the other side. Thus, the ability of the startup founder is what would be the game-changer for it. The better you can explain the figures, numbers, and vision to the investor, the better are the chances of convincing them to invest in startups.

Have you ever evaluated what could be the possible mistakes you might make while you are fundraising for your startup?

Well, it is undeniable to say that preparing for a few possible mistakes will make things go in your favor. But then, learning from what mistakes others have witnessed or committed, can be a great place to start learning about it to avoid them. So, here are a few mistakes we would want to talk about to prepare the best possible chances that your startups don’t incur losses.

1. The improper investor pitch (Talking about the product and not revenue)

Not being prepared enough to pitch for fundraising for business can be one of the biggest mistakes you can make for your startup’s scaling. While you have worked a day in and out for the growth of the startup, you might visualize its worthiness 5 times more than what someone else would think.

Thus, while you pitch to someone for investing in startups, make sure you do not just talk about the product or the service you have built, but also the revenue it has made and the profitable outcome it can get to someone who is investing in startups.

The other very crucial point to remember during the pitching process is to ensure you know about the figures relevant to the market and its profitability. Make a clear table in your head about the revenue breakdown, the figures of the sources which get you that revenue, and details about the competitor’s market and product too. This would make the investor realize your clarity and vision about your startup and this way, you can avoid doing one of the most common mistakes while you are fundraising for business.

2. Raising too much or too less money

Too often when one doesn’t have a crystal clear idea about what would be the next big step of the company, then the clarity of the amount you will require to get there is something one might struggle with. This mistake can be avoided when you have proper strategic planning done for it in advance.

If you do not have on-paper financial planning of what will you do with the capital after fundraising for your business or startups then there is are a plethora of chances that you might ask for either excess funds or lesser funds, which might impact the valuation of the company as well as might lead to either unfair use of it or shortage of funds.

Thus, even before you approach someone for investing in a startup, make sure you have detailed planning of what to do with it from the very next day of getting your hands on it.

 

3. Justified ownership distribution

Sometimes when startups are in utter need of funds to proceed further to cover up that rough phase, they choose to fundraise for business. During this time, one of the biggest and the deadliest mistakes one can make is to liquidate a bigger amount of equity to the investor.

However, this can be very easily avoided if you have pre-planned the number of shares and ownership distribution of the startup and have a written contract that mentions the powers and decisions after getting ownership of the company.

4. Wrong timing for fundraising

One of the most common notions we all have is to assume that the bigger the money, the larger the company revenue. And with this, most startup founders would wish to have more and more funds to invest in every stage of their startup.

This is another mistake that should be avoided while you are fundraising for business and looking for someone to invest in a startup at multiple stages. Knowing the exact stage where you would be needing funds, and maintaining the time right with respect to the revenue, valuation and the company’s operational need is the best way to avoid making mistakes like this.

5. Not seeking professional advice

The most significant commonality among all founders and entrepreneurs is their ability to deal with any problem they might face and make the best possible way to avoid making mistakes but in their own unique way. Here is the place where there is another chance you might end up making mistakes.

Before you reach out to an investor for fundraising, make sure you seek guidance from a professional that would help you with the current company valuation, which would give you more clarity about the ‘ask’ you should be making. An overestimated valuation, if not backed by supportive figures and futuristic vision, then it could be the key reason an investor would turn their back.

To get more assistance on this, you can also click here to find out how Team Kedden can help with their expertise about the valuation and nail the pitch that would help in fundraising for business

So, now that you know what all mistakes to avoid, make sure you keep an eye for it and prepare yourself efficiently. And in any case, if you wish to seek more deliberative and subjective assistance for your asset valuation and pitching the numbers before you are fundraising for business, the expert guidance from Kedden is just a tap away!

 

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