The increasing digitalisation of our economies means that for tech start-ups, opportunities are greater than ever. Technology helps level the playing field between start-ups and large corporations.
Savvy entrepreneurs can use this to their advantage to enhance their customer experience, do hyper-targeted marketing and improve the accessibility of their product or service.
Whilst devastating, the pandemic has been a catalyst for entrepreneurship. Record numbers of businesses were founded in 2020, as aspiring entrepreneurs founded start-ups through either necessity or increased time spent at home.
However, one of the biggest challenges many entrepreneurs now face is raising finance.
The idea of raising finance for your business can be daunting. But, with preparation and due diligence, it doesn’t have to be. I’ve raised over $20,000,000 of seed funding for start-up ventures over the last 30 years, and these are my tips for raising finance in a post-pandemic landscape.
In times of market disruption, the possibilities for innovation are enormous, and many VCs (including myself) are actively exploring opportunities. Seed funding investments fell by 39% in the first quarter of 2020 compared to 2019, but, despite this, I predict we will soon enter a boom period for start-up funding.
To make the most of this boom you must follow certain rules when it comes to sourcing funding for your start-up.
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Pre-seed and seed funding are the most common types of financing that start-ups require. Pre-seed funding involves entrepreneurs looking for the capital to prove a minimum viable product. Once you have proof your business works, you will look for seed funding.
At the seed funding stage, investors are looking for particular indicators that signal that your start-up is investable.
You must address all of the following in your business plan to stand a chance of investment.
What is the area of opportunity and what makes you different?
You must be able to describe the business opportunity and clearly state the USP of your product, service or business model. Investors are always interested in new and innovative ideas. The shorter and more concise you can describe your business, the better. This is your elevator pitch.
Is the market ready?
You need to quantify the size of your market and be able to back this up with research. This research should ideally come from a third-party source, not your own. You will have to demonstrate your market knowledge.
Your story and possible competition
You must outline what makes your business unique and what needs it will meet. If the idea is novel, investors will also want to know why no one has done it before and how you will respond to competition.
The exit strategy
You will need to be able to demonstrate a long-term strategy for your business. Investors will need to know your plans for selling the business and when they can expect a return.
At Entrepreneur Seminar, we help entrepreneurs prepare their business plans for investment using the same strategy. As both an entrepreneur and investor, I follow this framework too. If you can address all of the points above in your business plan, then you have a strong chance of securing investment for your business.
Written by Martin Warner, a global thought leader on entrepreneurship and a business mentor, educator, inventor, film producer, and investor.