Well, it is a no-brainer that every startup requires some form of funding to scale, grow, make profits and finally become sustainable. Not all of them are innovative enough to bootstrap and make it big. (Check Zoho and Mailchimp, great examples of bootstrapped companies). And things just went south, all credit to an unprecedented virus. Investors are more reluctant now than ever to invest in uncertain times, which calls for a change in ideology.
Founders hardly pay any attention to funding on a day-to-day basis. Raising funds doesn’t happen overnight. It is a slow, arduous and technical process that involves two parties or more. You cannot just jump out of bed, realizing that your cash-at-bank is going to last you just a few weeks and start rush-hunting for new money. A funding strategy is a long term and ongoing thing.
Running a startup is like a marathon. You plan your energy, resources and time them with a possible funding round. Would your rich uncle splurge a million dollars on your idea just because you are running out of cash? You know the answer.
Nobody funds just a product. They fund a potential company (team, vision, innovation, execution, technology, cash management, etc. all put together for a magic formula). When founders realize this, they need to work on certain tasks (or milestones) before approaching an investor for funding (more relevant now).
And those are:
- Achieve Traction: Where did you head with your product/service? Is it ready to market? Are people using it already? Are they willing to pay for it? Is there a return audience? Do you have paid customers? Find some quickly.
- Reduce Business Risks: What kind of risk does your enterprise face? Does your industry have a low barrier to entry? You don't have a strong monetization model in place? There is a lot of team friction? Your idea isn't scalable? Your industry is easily susceptible to market shocks? Well, get rid of these problems.
- Accept a ‘NO’: Never say NO to constructive criticism. If an investor isn’t willing to proceed, he usually has a business reason for it and he has no obligation to explain that to you. But always ask for feedback on how to make things better.
- Bootstrapping is also a way: It is not mandatory to raise funding. Period. There are many organizations out there who bootstrapped (spending your hard earned money and achieving organic growth) and many who chose not to go the venture capital way. It all depends on what your goals are. Take Menlo Innovations for example. Joy is their goal.
- Be Resilient: Investors admire organizations that have survived hard times. It shows how determined the team is and how robust your business model and cash planning is (Cure.fit is a great example of how businesses can adapt to changing situations. They started building an online content library to cater to their audience during the lockdown). Can you work smarter to make it out of this pandemic?
- Stay Innovative: External factors are out of founders' control. Is the business model nimble enough to pivot revenue streams, add new avenues or products and achieve healthy cash flows even during times of crisis? Staying on top of your game makes a lot of sense.
Assess your startup on the above pointers to understand your market standing. The money will start to flow back into the economy a few months down the line. The real question is would your company be ready to seize the opportunity.
So pull your socks up entrepreneur. And all the best.