5 Questions a Startup Should Ask Before Chasing VC Funding
You have a startup and all set to rock the world. Congrats!!
But wait… what about your funding? Do you have enough cash in hand to sustain in the long run? Have you thought about it?
Most startups don’t have a proper funding strategy in place and that’s a reason why they fail at a very nascent stage. In this article, we have tried to figure out what it requires for a startup founder to get funded and how to get such funding easily from venture capital (VC) firms.
Here are 5 basic questions every startup entrepreneur must ask himself/herself before approaching VCs for funding.
Question # 1: Is my business idea viable and scalable?
It’s not wrong for an entrepreneur to believe that his/her startup is a winner and his/her idea will take the world by storm. But, you have to think beyond it. Your idea should be backed by proper evidence so that other people also consider it as viable. They should also believe in your idea, especially VC firms.
Most entrepreneurs think they would get VC funding easily, but in reality it’s different. It’s hard to convince them. So, why wait, start your own if you are confident about your idea.
Start bootstrapping with your own savings. You can also borrow money from your friends or family. This is a good option to show your zeal to start your own. Even VCs will be impressed with the idea that you have the courage to start alone and didn’t sit back to get funding from any external agency.
Question # 2: Is my business model in sync with VC model?
VC firms prefer winning ideas. You might have a startup or a small business, but it’s not necessary that VCs would be interested in it. Therefore, the right time to approach a VC is when you think there are need to scale up and your business need capital. Also, you should be ready to chart a fast growth track, because your VC firm will want to sell their stake.
Question # 3: Why you want to launch a startup?
Well, many entrepreneurs launch a startup because they want to be their own boss, while there is another entrepreneurs group who are driven by a passion to disrupt the status quo. And there is other who likes the status of being a founder. Among all these three categories, VC firms like second category of entrepreneurs the most, who loves in disruption. This category of startup founders will never be satisfied with just making huge money; rather their satisfaction comes from changing the world and solving issues. So, it’s better to do introspection at the very beginning, about what kind of an entrepreneur you are.
Question # 4: Do you know which VC fund will be right for you?
Multiple factors come into play when you have to decide which is the right VC fund for you. But most important of them is to find out which VC fund can add value to your startup, and not just capital. More than capital infusion, startups need guidance, and an experienced VC firm helps you to avoid mistakes and provide valuable lessons. You have to choose a VC fund, which has good network with potential customers, investors, and acquirers. And most importantly, the VC fund you choose should have thorough knowledge about your field.
Question # 5: Are you ready with your team and strategy to grow your startup into a viable business?
A confident startup founder should have a great team backing his/her idea and a strong strategy in place to be successful. As an entrepreneur, you should have the quality to build a strong team and convince VC fund manager that you have the leadership characteristics. Any VC firm will try to see how good is your organization and collaboration skills. A VC firm will try to see you as an entrepreneur who has every quality to be a good team leader.
All the Best!!
Apart from imparting education to students, she loves to read and write about myriad topics. Begum is a guest author with Startup Simba and loves to write on topics such as career development and entrepreneurial skills.
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Originally published at startupsimba.com on May 18, 2017.
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