Three things every first-time entrepreneur should know about fundraising

Fundraising is a critical component of any startup’s journey. It’s something you will do many times as your business grows and scales, but being successful in securing early-stage funding is critical because it has the potential to impact the success of future capital raises.

Success requires strategic planning, effective networking and skilled negotiation.

There are three key elements entrepreneurs should know about fundraising to increase their chances of success.

1. Start with a good plan

A well-crafted fundraising strategy forms the backbone of any successful fundraising campaign, ensuring you know from the start, what you need and who you should be targeting.
Before you start, map out your key milestones, and determine the target amount you need to raise, the type of capital you need to raise, and the fundraising instruments you plan to use.
You’ll need this roadmap for your fundraising journey, but your investors will need this information too.

Put all of this in a short pitch-deck, along with your vision, value proposition and growth potential to clearly convey the opportunity to potential investors. This deck should be visually appealing, concise, and highlight the problem your company is solving, the solution you’re offering, along with some information on the market opportunity and competitive landscape, your business model and financial projections, and how you plan to use the funds you secure.

This can ensure you and your investors know exactly where you want to go and how they will help you get there.

2. It’s not about who you know; it’s about the relationships you build

Networking and relationship building are crucial for successful fundraising. Establishing valuable connections with the right people in the startup ecosystem, including investors, industry peers, mentors, advisors, accelerators, incubators and other entrepreneurial support organizations is essential.

Being part of the startup ecosystem is about more than just securing funding and increasing your visibility; it allows you to be part of a community that can open doors to partnership opportunities, and help you stay connected and up to date on emerging trends. Most importantly it provides you with a network of peers to support you through your start-up journey.

When it comes to building relationships with investors, it is important to remember that these individuals will not only be giving you capital; they’ll have a stake in your business and often a say in the decisions you make. They could even be the mentors you turn to for advice. For that reason, it is important to be honest and strategic about who you need to engage and how best to engage them. This means defining your ideal investor profile, understanding your ideal investors’ expectations and validating them in advance to ensure alignment with your startup’s vision and funding needs.

3. Know your worth

Negotiation and deal closure are the final and the most critical stages of the fundraising process. This phase involves conducting due diligence, negotiating terms with investors and securing the funding needed for growth.

To be successful, you need to not only present a strong value proposition for your company, you need to back it up with evidence of solid market traction, a strong founding team and a compelling value proposition.

Be sure you’re well prepped for these discussions and be flexible and open to feedback. These negotiations might require adjustments to your initial terms to reach a mutually beneficial agreement – just like any good relationship. These conversations will be the first of many you have with your investors if you are successful. You’ll need to be clear about how you are efficiently utilizing funds, achieving growth milestones, and continuously updating them on the startup’s progress.

These are just some of the many tips in Alberta Innovates’ Fundraising Journey Map which aims to arm startups with the tools and information they need to take a clear and structured approach to raising capital. Learn how you can increase your chances of attracting the right investors and securing the necessary capital to launch or grow your venture, by downloading the Journey Map.