Securing a new funding round is a significant turning point for startups. Without funds in place, even the savviest startup founders have difficulty developing product prototypes, testing market assumptions, and generating enough investor interest needed for future financing.
However, convincing an experienced investor that your team has the grit and tenacity to develop a next-generation product or service is no small feat. The most well-funded startups know that the fundraising process takes careful research and planning. The investor presentation must demonstrate the startup's unique value proposition, traction achieved, and how the startup is poised to generate a positive return on investment.
Over the years, we've seen hundreds of startups achieve their fundraising goals and objectives. We know exactly what it takes to attract investors and unlock a new funding round. In this article, learn more about the startup fundraising process. Use these expert insights to build or refine your startup fundraising approach.
Understanding the Startup Funding Process: 4 Simple Steps to Achieve a New Funding Round
Are you struggling to unlock considerable funding for your startup? Follow these simple steps to kickstart your fundraising journey, maximize your startup investment potential, and scale your business to all-new heights.
1. Outline Funding Goals and Objectives
The first step of the startup funding process is to outline funding goals and objectives. Typically, funding goals and objectives are documented within a business plan and later in the investor pitch deck. These tools serve as the roadmap for scaling fast, staying on track, and achieving startup funding goals and objectives.
Moreover, without these and other required documents in place, investors will have some difficulty seeing exactly where these funds will be allocated. Show investors how their funds will contribute to the success of your organization. What are you planning on doing with investors' funds? Where will these funds be applied? The most successful startups go into great detail when it comes to resource allocation.
Related: Business Plan Checklist: 5 Components Startups Must Include
2. Create Your Budget
Building an accurate budget is one of the hardest things to do, especially for early-stage startups with limited historical data to forecast with. How do you figure out what to do with investors' money before you have it? Moreover, what does your startup need to do in order to maximize the investment runway and reduce burn rate? To create an accurate budget sheet and show investors that their money will be used appropriately, consider the following startup expenses:
- Equipment: Depending on the nature of your business, equipment costs can be one of the biggest monthly expenses. Be sure to budget for computers, servers, and other miscellaneous technological equipment.
- Human Resources: In some cases, startups spend up to 25 percent of total revenue on human resources expenses including employee recruitment, payroll, training, benefits, and more.
- Legal: Costs associated with mission-critical legal responsibilities are often overlooked. To save in this area, consider minimum viable legal protections, alternative fee arrangements with lawyers, and outsourced general counsel.
- Marketing: Budget for social media, website development, advertising, and more. Marketing is an integral component of long-term business success.
Related: Top 5 Startup Expenses Founders Must Budget For
3. Research Investors
Now that you've outlined your fundraising goals and objectives and created a startup budget sheet, it's time to find a qualified startup investor. Start your search for an experienced startup investor by following these helpful tips:
- Ask for Referrals: The best way to get on an investor's radar is through a warm introduction. Every investor has their own criteria for investing. However, many investors will open their wallets for founders who come recommended to them. To get a great referral, start by connecting with industry leaders, mentors, peers, and those who have already navigated the tumultuous fundraising landscape.
- Take Advantage of Online Communities: Check out some of these popular online research tools including Crunchbase, Gust, and SeedInvest. These online communities are great for accessing investor information.
- Consult With an Attorney: Chances are, your attorney regularly deals with term sheets and other investment legalities. Ask them to introduce you to an investment client or two.
Related: How to Find Qualified Tech Startup Investors
4. Perfect Your Pitch
After you've found the right startup investor, it's time to perfect your pitch. Gather all your documents — business plan and investor pitch deck — and show investors why your business is a worthwhile investment. Look for opportunities to paint a compelling brand narrative. Why is your business worth investing in right now and what's at stake if the investor doesn't choose you?
Related: The 4 Most Painful Investor Meeting Mistakes Founders Typically Make
Unlock Startup Funds at RocketSpace
To accelerate the startup funding process, many founders join programs designed to assist with financial due diligence, investor outreach, and more. RocketSpace offers a comprehensive and proven program for startup fundraising — Startup Services.
Reducing the fundraising timeline by raising capital from strategically aligned investors is the single largest competitive advantage a startup can have. The team leverages extensive investor relationships to accelerate the fundraising journey. This three-month, three-phase program is designed to provide high-quality, hands-on, and customized startup coaching to lead you to the right investor. RocketSpace Startup Services is the premier program for top-tier startups seeking smart capital.
Applicants must meet the following criteria:
- Have a product in-market gaining traction or be revenue generating
- Have already completed a Seed Round
- Have a strong founding team
- Be on the growth journey
