A lot of startups want funding, but the truth is a vast majority of them may not get it.
Because their businesses are not ready to receive funds.
You’ve got an idea that you’re excited about. You’ve talked about it with your friends and family members. You might have even quit your job to start exploring the possibilities of entrepreneurship.
You’re on the verge of getting your company off the ground, but to do it, you need capital, and you can’t front all the money yourself.
Before you go out to seek funding, whether that’s from an angel investor, a venture capitalist or through a crowdfunding platform, make sure you’ve satisfied all the requirements of this 19 point checklist:
1. Market research
Market research is the verifiable data that demonstrates the need and viability for your idea. Without it, your idea may only be good in theory. You might have to pay to get access to the data you need, or perform some research yourself, but you need to have this numerical grounding if you want to prove your potential worth.
2. Financial models
These should be a natural part of your business plan, but don’t underestimate the level of detail required by most savvy investors. You’ll need full spreadsheets of projected costs, acquisitions, sales and revenue, including your profit margins, growth rates and when you expect the business to become profitable. This is going to be the proof that your business can actually make money.
3. One-, three- and five-year plans
Don’t focus exclusively on how you’ll build your business from the start. You’ll need to chart out your projected growth over the course of the first year, the first three years and the first five years. Most investors want a long-term solution in a business with staying power.
4. Potential customers
Your market research should prove a theoretical customer base for your idea, but potential customers will drive your point home. If you can acquire at least a handful of testimonials from your prototypical customer or a major client that’s interested in your idea, investors will be much more interested in working with you.
5. Real ability
You’ll also need to make sure that you’re capable of handling the first stages of development and business growth personally. If you have years of experience in the industry or other proven credentials, you should be in good shape. Otherwise, you’ll need to undergo training or secure outside resources to help you along.
6. Decide the Right Funding Type for You
Bootstrapping, crowdfunding, business loans, VCs, Angel investors… weigh the advantages and disadvantages of different funding types before you decide which option to pursue.
7. Create Your Pitch Deck
Whether you’re pitching Angel investors and VC firms, potential crowdfunding backers, or your parents, you’ll need a compelling presentation to get people as excited about your company as you are
8. Determine Your Break-Even Point
Launching a startup and seeing success is an exhilarating process, but can still take you underwater unless you know your break-even point. How long will you need to work on selling your product or service before you hit that point where you’re no longer in the red? It could take years to turn a profit. Will you still be passionate about your startup, or ready to move on and start working through this checklist again with a new idea?
9. Nail Your Production Estimates
It’s important to know much your startup will actually cost, starting with your production estimates. Can you produce the product, like software, yourself? Or will you rely on vendors to do it for you? If you need outside help to get your idea produced, then you need to nail down your costs to figure out your funding needs and how much of a profit you’ll need to turn.
10. Understand Your Talents and Limitations
Very few people will become the next Steve Jobs or Bill Gates, regardless of their ambition or talent. And even if you did find a viable business idea that could scale to the size of Apple or Microsoft, you would need an unbelievable amount of persistence, motivation, and willingness to do the hard work involved. So instead of living in denial about your talents, take inventory of what you’re truly good at, as well as where your limitations lie.
11. Get Potential Customers On Board Early
One of the quickest ways to validate your startup idea is to talk to your target customers as early as possible. Reach out to existing clients, attend networking events, go to trade shows, and show up anywhere your clients are likely to hang out. Once you’ve gotten their feedback, determine if you can mock up a prototype or blueprint to get pre-orders and start getting cash flowing into your new company.
12. Refine your pitch
You need a good elevator pitch for many reasons: potential investors, customers, prospective new hires, bankers. If you can’t persuasively and clearly pitch your business, how can you expect key stakeholders to buy in?
13. Find Tools to Run Your Business
Startup life is chaotic, but the right tools can help you stay on top of all your work and make sure everything runs smoothly.
14. Secure your IT
Whether you’re running a tech company or not, you likely have sensitive data on computers and devices that you want protected. Protect it from intrusions and disasters. Back it up! IT problems can derail a fledgling company.
15. Refine your product, and marketing and sales approach
As you go along you will learn more about the marketplace. Use customer feedback to refine your product and service offerings, and your go-to-market approach.
16. Existing investment
It looks good to potential investors if you already have some skin in the game. Take whatever savings you can spare and gather up some initial capital from friends and family to show investors you already have some financial backing.
17. A brand
Typically, your brand will come into play during the marketing phase of your business’s development rather than the fundraising phase. However, a strong brand can help sell the viability and character of your business to potential investors. It’s a demonstration of identity that can concisely and creatively drive your idea home.
18. A goal
Before you start asking for funds, you need to know exactly how much money you need and why you need that much. There’s a big difference between saying, “I need money for my idea,” and, “I need $10,000 for equipment, $15,000 for an office, $20,000 for a first run of products and $5,000 to start marketing.” The latter shows you have a plan, and lets your investors know exactly where the money is going.
19. A payoff
Last but not least, make sure you have a specific payoff in mind for your investors. For a crowdfunding initiative, that might mean having sample products or rewards for different investment levels. For individual investors, that might mean a projected payout after a certain period of time has passed.
If you’re missing one or two items, it’s not a deal breaker, but be sure you satisfy most of the items on this list before you head out. If you can do that, and your idea rings true with the right people, you should have no trouble getting the money you need for the next stage of your enterprise.
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