Factors Early Stage Startups Should Keep in Mind before Generating Funds
Here are the things that early stage startups should achieve before looking forward to generating funds from early-stage Venture Capitalists and Investors
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
Want to start a startup on your own? Well, if this is your own business with a novel idea with minimal funding and if you haven't been even part of any family business to financially assist your new business; you will definitely need early stage fundings and venture capitalists. Apart from the financial pillars, you will also need connections to network with. Most entrepreneurs and startups dealing in businesses of any sort need funds and investments to go ahead and gear up their business for the long haul.
Great ideas for startups along with a solid business model & strategy and brilliant employees who can ideate the business along with you are the first baby steps towards shaping your wonderful idea into reality. Businesses in the earliest stages demand a lot more than that.
The startup generation has been a head turner for investors and many of them have already surfaced in the market as investors for early-stage funding, starting from Seed Funding to Series A, B and C funding. Offering these investments to entrepreneurs interest investors as they can capitalize on the promising companies for equity and/or for partial ownership. But generating investments is no walk in the park on a sunny day. And while or after setting up the startup if you are looking for funds and investments, you should ensure that the following things are attained. Investment leaders share insights.
In order to help startups get a brief outlook on this Fireside Ventures that invests in early-stage consumer brand startups and Eagle10 Ventures, an early stage investor of tech startups, share insights.
Why the Investors Choose Early Stage Funding?
In order to generate funding at the early stage, an entrepreneur needs to understand why the early stage investors are eyeing this. Fireside Ventures, the early stage venture fund has closed its fund in February 2018 with a corpus of INR 3.4 Billion. It has deployed INR 2.04 Billion across 18 investments to date. Its co-founder & Managing Partner Kanwaljit Singh explains why the company invests in startups in their early stages.
"We believe this is a great time to build a new age, exciting brands catering to the changing consumer preferences. We chose early-stage investing as our focus because we bring the right mix of capital and expertise in helping young Companies build the right foundations for growth. We also follow a model of investing in the Companies across stages as they demonstrate product-market fit an early proof of concept," he illustrates.
Things to be Done before Generating Investments
As it gets clear why the investors are drawn towards the early stage funding, businesses should ensure that they have covered certain aspects that will not only attract the attention of investors but will also make sure that they won't turn their backs to your startups.
Prashant Pansare, the co-founder of Eagle 10 Ventures, points out the things that startups should attain to grab investors' focus.
Culmination of Passion and Reality: Passion is the most important feature that will keep your business running. But getting swayed only by passion won't help you steer your company in the right direction. "You should choose a large enough market instead of just building something out of passion! Every idea starts with passion mostly but few can turn that into a real startup opportunity or large enough business opportunity that interests investors. If you can't grow, an investor cannot make returns," Pansare points out.
The Perfect Team: A company that has the right set of people with the right set of skills will never go wrong. This is one of the very first things that should be ticked off the list. And along with the right skill sets, you will need people who have risk-taking capabilities and spirits to survive in the startup ecosystem. "Build the right team for problem and market (diverse experiences + skills + culture fit) – great things can only be achieved by a great team," adds Pansare.
Checking Real-Time Consumers: A product or a service might look real promising to you but chances are really high that the real-life market reach is almost or completely non-existent. So before you venture out with your supposedly promising technology, check how the market is responding, distribute samples or make them try your service for no-cost before actually starting to tailor it to reality. Adding more to his advice for startups, Pansare further adds, "Validate their hypothesis of the solution with real customers. AS CB Insights survey, over 40 per cent of startups shut down because there is no need for what they are building. Paying customer is the best validation of their thought process."
Now that you know what needs to be done, best of luck with your startups!