3 Ways To Make Funding EasierJul 26, 2022
How To Get Funding For Your Startup: 3 Ways to Make it Easier
There are many exciting things about being an entrepreneur, like developing a product that connects with customers, filling a gap in the market, building something of your own, being your own boss, and setting your own schedule.
One aspect of founding a company that isn’t fun? Getting funded.
Funding is one of the most challenging parts of being an entrepreneur and the most important. While we often hear about companies securing investors from an idea alone, that’s simply not realistic for most business owners. Even the brands on Shark Tank need to bring an innovative product, customer traction, and a marketing plan to the table. To help you get ahead, here are three ways to make it easier to get funding for your startup.
Get Funding For Your Startup, Here’s How
After a stint in the corporate world, I realized that entrepreneurship was my true calling. I drew upon my life experiences to create businesses, including one that sold innovative wedge sandals with interchangeable tops under the brand name Cat Perkins. While building Cat Perkins, I had to learn how to create the right team, roll out a business in an industry I had no experience in, and raise money. My co-founder and I had many knowledge deficits, so with (a lot of) trial and error, and a world class team of advisors, we figured things out. Now, I help entrepreneurs speed up the process by avoiding my costly mistakes.
Throughout my career, I've raised millions of dollars for other people's businesses and my own ventures. I’ve met with hundreds of investors, giving me unique insight into which companies get funded and which ones don’t. With my experience, I've developed a framework for finding funding, which I’ll detail below. This framework will prevent you from wasting your time and spinning your wheels on funding that doesn’t materialize. It’s time to get funding for your startup.
#1 Don’t Waste Time
The first funding tip is to stop wasting time pursuing funding that isn’t right for your venture or business stage.
When I co-founded Cat Perkins, I made several mistakes, like thinking my products would be attractive to venture capitalists (VCs) before we had any sort of real traction in the marketplace. I wasted too much time seeking and taking meetings with VCs too early.
You might think that you’re the exception to the rule. You’re almost certainly not.
It’s essential to align your funding method to the stage of business you are in - early-stage, mid-stage, or late stage. For example, early-stage entrepreneurs should focus on bootstrapping, donation-based crowdfunding, friends & family financing, grants, incubators & accelerators, and in some cases, angel investors/angel federations.
Mid to later-stage financing options include accelerators, equipment financing/factoring, equity crowdfunding, angel investors/federations, and VCs.
Remember, time is money, so don’t focus on what won’t work. Funding a business requires a funding strategy, but make sure your strategy is aligned with your business milestones. For example, ask yourself, “What will be achieved with this round of funding?” Proof of Concept? Ability to scale? Something else?
#2 Find Funding Prospects Aligned With Your Business
Successful funding depends on finding funding prospects that are aligned with your product or service and your target customer.
Determine where your product will be best received and where the product and price point will be in harmony with your investor type.
A great example of a company that aligned their product with their funding method is the company, Coolest Cooler. Coolest Cooler created a Kickstarter campaign for their multi-functional cooler. Coolest Coolers were tricked out with USB chargers, waterproof speakers, a blender for drinks, a bottle opener, LED lights, and lots of storage space. Plus, it combined retro and modern design elements for a fun and easy-going feel.
The startup raised $13.2 million on Kickstarter, a record for the funding site. Their success was due to the fact that they had just one SKU (the fewer the SKUs the better on a crowdfunding platform) and their backers were Millennials, who make up a large portion of the kickstarter community, their ideal target audience. The Coolest Cooler fit with many millennials' lifestyles, and they could afford the $165 price point.
In stark contrast to that success, was my experience pitching convertible women’s travel shoes to an almost exclusively male group of VCs. In my experience, investors invest in what they know and understand. Most male VCs do not understand why women even need to pack so many shoes for a trip in the first place. As one male VC put it, “I wear black and brown shoes and sneakers to the gym. I don’t understand the need for multiple colors of shoes!”
#3 Build A World-Class Team Of Advisors Even On A Startup Budget
One of the most integral parts of my success at Cat Perkins was my advisory team. Building a world-class team of advisors is non-negotiable for entrepreneurs.
You are three times more likely to succeed if you work with top-level advisors or mentors. TechCrunch published a 10-year study of tech start-ups in NYC. Companies, where a top-performing entrepreneur/advisor mentored the founder, were 33% more likely to succeed than companies that didn't have advisors.
However, many startup founders don’t fully understand what an advisor is, so let’s define it.
An advisor = a person who has achieved success in an area of business related to the business you're building. They may start as a mentor but will take on a more prominent role within your company once you’ve determined their value. Advisors to start-ups often receive options for their time, experience and guidance.
The most successful entrepreneurs usually have multiple members on their advisory boards who bring different skill sets and experiences. An excellent advisory committee will connect you to other companies that could benefit your start-up and provide introductions to investors or potential partners to help you get funding for your startup. Ultimately, they give you the advice, access and legitimacy to get over the “early-stage” hump.
Check out The Ultimate Advisory Board Starter Kit to learn which types of advisors you need and how to attract them.
Hopefully, these three tips will help you look at your funding options more carefully and help you avoid wasting valuable time on options that are less likely to work for you.
Here’s to your success!
Deb Perkins is a serial entrepreneur, funding strategist, and founder of Broad of Directors, an educational platform for early-stage entrepreneurs that need a no-nonsense guide to build a great team and get funded.
Learn more by following us at @broadofdirectors on Instagram and FB and @broaddirectors on Twitter.