Summary: A startup`s fundraising efforts depend on its ability to make itself and its business ideas appealing. Here are five common mistakes every entrepreneur must avoid.
According to a report by IBM Institute for Business Value & Oxford Economics, over 90% of Indian startups fail miserably within 5 years of inception.
Starting a business is a pricey process. From hosting a website to hiring the right people, everything can quickly add up to the cost of the company. So unless you are independently wealthy or able to monetize right away, you will need large funds to foot the bills.
However, it does not mean that you should start rushing to people and start asking them for money to raise funds for your startup business. Before you think about raising funds, stop and consider the best way to raise money sustainably for your business. You can also hire a business coach to help you raise funds.
To ensure that your startup runs smoothly, we have listed out a list of fundraising mistakes that every entrepreneur must avoid:
1. Raising Capital too Early
When you have invested your own money in your business, you can stop the project anytime. But once you borrow money from investors, you will feel intensified pressure to make your business a huge success. You will have to give away a lot of equity in your company if you go this route. Hence, try to bootstrap your business and try to use existing resources to avoid the extra pressure.
2. Not Seeking Professional Advice
Entrepreneurs are often independent and self-sufficient. Hence, they often try to overcome any obstacle on their come that comes their way. While this conquering spirit is part of what makes entrepreneurs great, it can also be a fault. When raising funds for your startup, it’s critically important to seek the advice of professionals to better understand your funding needs and requirements. Consulting a business coach with real valuation experience can help you save your time and money on the wrong decisions down the road.
3. Not Raising Enough Funds
Some entrepreneurs ask for less funding than they require. It is the biggest fundraising mistake that can lead to the shutdown of the startup. Always ask for the amount by keeping your financial requirement as realistic as possible. Don`t worry about scaring investors by asking for the amount of money you will require for your business. To know step by step process of fund raising, watch here:
4. Lack of Clear Objectives
Having a clear goal in mind is essential to raise capital investment. Figuring out how much money you need to reach your next milestone is essential. From operational costs to essential professional services, determine how much capital you need. Not having a clear idea is another mistake that every entrepreneur must avoid.
5. Giving up too Much of the Company
One of the worst fundraising mistakes that entrepreneurs can make is giving up too much ownership of the company. While a deal that includes a good portion of your company might seem appealing, you could end up paying a much higher cost down the road.
Try to keep ownership within the company. Find out ways to raise or access funds which are more feasible.
Also, don’t forget to build and create relationships as you may come across people who can help you with investment. If you don’t know where to begin, start by making a list of businesses that intrigue you. You can use tools such as AngelList and Crunchbase to get a sense of the investors behind each project. You can also hire a business coach who can help you with networking.
These mistakes might appear small, however, if you want to successfully run your business, avoid falling into the trap of repeating these costly mistakes. Want to know the fundamental rules of fundraising?