Once a startup idea has been floated, and initial steps towards proof-of-concept have been taken, the hard struggle for raising funding sets in. How to build a successful functional prototype, and scale up?
There are many different ways to build funding. Entrepreneurs usually invest all their personal funds, and rely on capital from friends and relatives.
What if one does not have enough capital to commit? Should one bleed, and burn out? Securing the first round of funding is the toughest, as investors look for clarity and purpose from entrepreneurs.
It is important to take a systemic approach to raising funds, and success depends on how well ones executes the following five steps:
1. Zero in on the Core Value Proposition (CVP)
When seeking funding, it is important to showcase the startup vision and the personal brand equity of entrepreneur. One should be clearly able to articulate the CVP of the startup, including:
What is the business problem one is addressing?
Why it became necessary to start-up?
What are the critical barriers preventing startup success?
How the CVP of the startup will help in successful scale-up?
2. Clarifying the probabilities for Success
Going beyond the passion one has for one’s startup idea, it is important for a entrepreneur to take a hard cold look at the probabilities for success. This will include defining the end market one is trying to address, the growth prospects in the industry segment, and the barriers therein. One should be clearly able to define the following:
Does the startup have compelling CVP for end customers?
Is the start-up a “me-too”? If yes, what additional CVP does it have compared to competition?
How quickly do investors get financial returns on the startup?
3. Developing the Business Case
Once clarity has been secured on the market and probabilities for success, one should be able to develop a exciting business case for potential investors. At this stage, the startup should address the following elements:
What is the end market the startup is addressing?
Where are the customers based? What is their profile?
What is the go-to-market strategy for the startup?
How will the CVP be made clear and irresistible for end customers?
What is the monetization strategy?
What is the fresh capital intended for? What are the top three things high on agenda?
4. Develop functional prototype, and generate initial sales
While the process for raising capital is going on, it is imperative to work on the idea and constantly refine functional prototypes, taking the startup beyond a mere “ideation” phase.
By doing this, one is able to increase the chances for securing capital. Investors will definitely appreciate having some “hard numbers” to back up the human aspect of the startup. In other words, investors are excited by startup vehicles that have the potential for scale-up.
5. The Final Stage: The Story of “Missed Bus” Angle
Beyond the business case and the clarity that one has for one’s startup, it all boils down to how the potential investors could be won over.
At this stage, one should be able to showcase the personal strengths and profile of the entrepreneur, and the vitality of the business idea, including returns expected over the short- to long-term – and, most importantly, how not investing in the startup would lead to missing the bus!
Are you a startup or established company looking to raise capital for your tech? Talk to us at Hammerkopf. We enable ideas into realities.