Startups Business – Determining if Your Business is Ready for Funding
Having the ability to raise capital is a key engine of growth in a startup business. However, before pursuing funding from venture capitalists (VC), other investors or through crowdfunding, a startup business must satisfy several requirements in order to not only increase its chances of obtaining the necessary funding but also to maximize the funding’s impact on the business. The four most critical requirements that capital markets will inspect very closely are:
- 1. A complete business plan
- 2. Detailed market research
- 3. Realistic one and multi-year plans
- 4. The expected payoff for the investors
One important additional consideration that a startup needs to consider is if the business has decent growth prospects without addition VC funding. One of the primary drivers of failure in startups is rushing to scale too quickly and drowning debt due to heavy, fixed operation costs.
Without a detailed and realistic business plan, a startup will find themselves coming back empty-handed after meeting with investors. The business plan is the foundation upon which the startup will be built presenting an overall summary of the startup business and the method(s) by which it will make money and achieve profitability. A good business plan will provide documentation for projected business costs, sales, revenue, profit margins and potential areas of growth either organically or through acquisitions. A business plan should give a realistic data on when the startup is expected to achieve profitability.
There are many excellent ideas that sound great in theory but do not result in a profitable business opportunity due to a lack of viability in today’s marketplace. Conversely, ideas that sounded almost nonsensical at the time (e.g. the pet rock) were wildly successful in the marketplace. Solid research provides the grounding for the numerical projections when making a capital request.
Even if a startup projects great growth during its first year, investors are going to want to see plans and projected growth over multiple years. The ‘holy grail’ that investors look for in a business is a potential to go public at some future point. Therefore, they will focus on the staying power of a business much more that a chance to turn a “quick buck”.
Investors are apt to not provide funding for any business that does not offer a specific payout for them at some specific point in the future. This payout can take many forms, especially for crowdfunding ventures, but the promise must be explicitly mentioned.
If your startup meets all of this criteria and you are ready to pursue funding, contact us and let us help you grow your startup.
1. A Complete Business Plan
Without a detailed and realistic business plan, a startup will find themselves coming back empty-handed after meeting with investors. The business plan is the foundation upon which the startup will be built presenting an overall summary of the startup business and the method(s) by which it will make money and achieve profitability. A good business plan will provide documentation for projected business costs, sales, revenue, profit margins and potential areas of growth either organically or through acquisitions. A business plan should give a realistic data on when the startup is expected to achieve profitability.
2. Detailed market research
There are many excellent ideas that sound great in theory but do not result in a profitable business opportunity due to a lack of viability in today’s marketplace. Conversely, ideas that sounded almost nonsensical at the time (e.g. the pet rock) were wildly successful in the marketplace. Solid research provides the grounding for the numerical projections when making a capital request.
3. Realistic one and multi-year plans
Even if a startup projects great growth during its first year, investors are going to want to see plans and projected growth over multiple years. The ‘holy grail’ that investors look for in a business is a potential to go public at some future point. Therefore, they will focus on the staying power of a business much more that a chance to turn a “quick buck”.
4. The expected payoff for the investors
Investors are apt to not provide funding for any business that does not offer a specific payout for them at some specific point in the future. This payout can take many forms, especially for crowdfunding ventures, but the promise must be explicitly mentioned.
If your startup meets all of this criteria and you are ready to pursue funding, contact us and let us help you grow your startup.
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