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Startups

Applying For Funding? Here's What You May Be Doing Wrong

You may have a great idea, but if not presented well, the funding may never come
Applying For Funding? Here's What You May Be Doing Wrong
Image credit: Shutterstock
4 min read

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Fund-raising is one of the most difficult phases in today's startup ecosystem, with mortality rates of stratups increasing by the day. While some manage to remain bootstrapped and continue their business, most ventures seek funding in some capacity for expading their business further. 

But despite having some great ideas and promising business models, some ventures struggle to get even the intial funds. Find out what you may be doing wrong when pitching for funding and how you can improve on the same. 

Targeting The Wrong Investor

It may have been tough to know what well-guarded investors think about a decade back, but now both VCs as well as angel investors are quite open about the sectors they like to place their bets on. A critical mistake made by startups, is to invest their time and efforts on funds and investors who do not cater to their venture domain. For instance some funds are out and out tech-driven, and do not invest in capital intensive models, ideas like food and retail that require heavy capital and logistical spending will never a strike a chord with them. Rather a fund which is open and active in the retail and consumer space will see a better opportunity in the idea.

Assesing the fund capacity is also crucial. Its futile to pester investors who have set a cap on their fundings to give them more than what they normaly do. So if a typical VC fund only assists in early stage and has cap of $1mn, it is futile to chase them for a Series A or B round, where the entrepreneur expects a much higher figure. What can be done though, is to leverage the fund's connection and see if they can help you secure the remaining  amount, a feat acheived by many startups in the recent past who have raised big amounts from multiple funds at once. 

Not Being Thoroughly Prepared

It's hard to get hold of an investor's attention with so many vying for their time. While most VC firms try and take out time to go through your proposal, some in particular like angel investors may only have limited time. The trick is to be alwyas prepared with different formats. A presentation is standard when you send a prososal, but what about convincing the investor in the first place to take a look at yor proposal? Be prepared in such cases with a short and precise pitch that may interest the investor to take the converstaion ahead later. 

Once you do get the chance to present your idea, make sure to use your best resources and planning, and be ready to address more practical questions related to your business, rather than aspirational ones.

Seeking Funding Without Being Operative

While having innovative ideas is great, its as important to execute them. No one wants to invest in a business that has not tested the waters and exists just in concept. Infact most investors, always want to know what is the initial money made by the startup with the existing model plan and why they should fund that model. 

"The best way to do this would be to test out the product/service in a smaller market and then see how it functions, to get a n idea whther it is a business proposal that deserves expansion or not, " said Ben Mathias of Vertex Ventures. 

Changing Your Pitch and Proposal Too Often

It's integral to please investors but not to the extent that you lose what you actually stand for. Ventures like Uber, and Airbnb were rejected times over, because some investors did not believe in the idea. But the founders stuck on with their belief, and resulted in creating two of the most iconic startups in recent times. 

Shedding light on why entrepreneurs need to stop customising their pitches as per investors, Vikram Gupta of IvyCap Ventures says, " More than often founders feel they need to change their pitches to constantly keep up with the investors. Sometime they completely change the business idea. While working on improving technical and financial nuances of the pitch are necessary, chaning you pitch as per the investor is something that can be avoided in order to have a clear vision of what you ultimately want to do."

 

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