The Internet’s meteoric rise has made it easier than ever before to find the venture capital needed to fund your startup. Now startups vying for seed funding have access to a vast network of venture capitalists that are looking for bright, new businesses to invest their time and money in. But new opportunities come with new competition, and startups must now compete on a global scale.
In order to make the cut and get your chance at pitching to potential investors, your startup needs to be truly enticing. Here’s the low-down for startups that are thinking about pursuing seed funding opportunities.
Reflect on Goals of Your Startup
Not all startups are cut out for seed funding. Your business could be steady and profitable but still be mismatched for the profile that venture capitalists typically look for. Furthermore, many startups do just fine without needing outside funding for their business. Startups should already be well on their way to becoming profitable before approaching venture capitalists.
To find out if seed funding is right for your business, you should ask yourself one question: am I missing out on business opportunities that I could get with more funding? If your startup is ready for the next level and all it needs is a little push, then seed funding could be the step that’s needed to drive your business further.
Leveraging Your Professional and Personal Networks
Nothing happens in a vacuum. Funding your startup relies on finding the right people who believe in your cause, and tapping into your existing network should be the first tactic that’s employed when searching for potential investors. Finding people who are familiar with you and your work will make for a sympathetic investor, and this type of investor usually much easier to make a successful pitch to than someone who you connected with via cold calling.
Personal networks can also lead to increasing financial knowledge and expertise. A survey by Endeavor Network found that startup founders who found experienced mentors were three times more likely to exit their business with $100 million or more.
Seed Funding Always Comes with Strings Attached
When that seed money finally starts to come in, be ready for the compromises that come attached to it. Investing in startups is risky business. Around 60% of startups fail, so venture capitalists expect a significant return on their investment. Keep in mind accepting outside money means accounting for outside opinions on finding the best course of action for your startup. Because so many startups fail, venture capitalists are always taking on significant risk in the seed funding process.
Investors typically look for companies that scale quickly and show promise of huge returns. If you plan to run your startup on a more moderate business path, then that should be discussed with investors so they can get a sense of what return to expect on their investment.
Watch the Work of Peers & Competitors
Because startups are competing with each other worldwide now, every aspect of the business must be accounted for and reasoned through in order to pitch the best value statement to investors looking to invest their seed capital. If the startup you plan to pitch is based on doing business via the Internet, then this rule holds especially true.
Before approaching a venture capitalist, take a look at how your peers and competitors are running their businesses and find out what makes your startup unique. Potential investors are always looking for startups that have figured out a new way of delivering a value to customers that on one else has figured out yet.
Acquiring seed funding for your startup in the breakneck speed of tomorrow’s economy is no simple feat. But smart founders will look inward to find out what makes their startup stand apart from competitors, and use that insight to scale their business by leveraging smart pitches to investors and access the seed funding that they need to succeed.