As a startup founder and entrepreneur, your passion is at the warm core of your business. Then comes the fact that you need to have sales, be able to scale and continually grow your business. Plus, finding the right financing often becomes a full-time job.
We have witnessed that many feel that their energy is draining away from their true vision and passion.
Let’s give ourselves 100% to our business again with the help of these 10 tips on how to avoid common startup failures.
Unfortunately, lack of funds is one of the main reasons why a startup fails.
We firmly believe in bootstrapping. It keeps you funded, tests your MVP, and defines the path you’re following. However, bootstrapping has a limit. Trust us, when you have the funds, you will fly closer to the sky.
Don’t focus on a single source of funding. Combining funding sources will allow you to diversify the stake someone has in your business. It will provide you with different knowledge and will not put as much pressure on the person investing. Because it will be more difficult to ask someone to part with half a million euros compared to a feasible 150,000.
Often, a startup’s multiple sources of funding are codependent on each other. Grants and incentives require co-financing. For example, if you have a deal of 50,000 euros for an incentive, then you only have to find 50 from friends and family.
Combine your sources and create the most optimal funding puzzle, so you can accelerate your funding journey instead of chasing that one funding source. This will allow you to reach your goal and go from 50K to 500k.
The last few months you have been very busy managing your business. You realize that now, you almost have no money. So you start to get stressed. You decide to look for financing.
However, the right time to look for funds is when you don’t need the money. Start looking when you just raised a round or when your cash flow looks positive. Some advantages:
- You don’t seem desperate.
- You have a greater variety or possibility of choosing who you want to work with.
- It gives the investor more confidence, because they feel that you know what you are doing
- You will be able to plan much better and be proactive instead of always chasing money.
You have a great business idea, a careful pitch deck and you have practiced your elevator pitch 100 times. You’re excited and you want to get out there and get funding. However, does your speech adapt to the type of investor you are addressing?
Keep in mind that each type of investor or investment house, whether a government, a VC, a business angel or a bank, has different KPIs and ways of evaluating companies. Let’s look at the following examples.
It’s like being a good salesman. Make it personal, don’t be a sales “robot.” Know your audience and modify your speech, your business model and your argument based on what you are looking for.
Please do not do it.
“Half of the 2,000 investment opportunities came from startups, 20% from acquisitions, 15% from distressed companies and the rest from smaller companies offering shares.” Marc Coucke, businessman (source: Lars Andersen; Belgian)
Imagine if 2,000 startups wanted to meet with investors for an hour.
Make sure your business pitch is a foot in the door. It should be your resume. Send it to multiple people. And it works with various formats, such as a 2-page teaser, a smaller, sales-oriented pitch deck, or a more detailed deck.
«Within the long process, the pitch deck was quite important to get an invitation»says Jimmy Pommerenke, founder of Ceeyo.
You never get a second chance to make a first impression.
Harlan Hogan, voice actor
What can be lost? You will ask yourself. Well, a lot.
Don’t give multiple investors “a chance.” If you’ve got your eye on a partner you really want, make sure you give it your 1000%.
Start by classifying the different investment opportunities. Mock up your speech to people who are not directly interested in your business. Whether it’s an investor friend from another sector or someone you know who invests on a smaller scale.
This has two advantages: First, you gain experience on how to approach an investor. Secondly, you can apply their feedback so as not to spoil your first impression with the investor of your dreams. In short, learn from Category C’s feedback, go to Category B, and finally wipe out Investor A.
We have seen on many occasions that a startup presents a growth plan in the shape of a hockey stick. Many investors see this as a first red flag, since growth like this is a difficult forecast that only very few in the world can have.
It will be the first question investors ask: “Why do you think you’re going to grow like that suddenly and exponentially?”. In our opinion, it is better to show more gradual but sustainable growth rather than a hockey stick projection that cannot be complemented by concrete facts.
There is often a lot of fine print in bank loans and grant agreements. You have to read it carefully. For example, some ask that you return with certain information in a few weeks. If you don’t, your grant or application will automatically be rejected.
Don’t underestimate the number of steps some applications take. It is always better to be over-prepared to avoid last-minute tasks.
For a startup, on the other hand, sometimes it is better to apply a month later or in the next round than to rush and have an application that does not go ahead.
As mentioned above, each party has its own KPIs that it must meet. Direct your request to the appropriate party, depending on what you want.
It’s good to have big ambitions, but you have to be realistic. Higher ambitions mean higher expectations and come with more reporting considerations. You will be more likely to be rejected if you are not on the same level as your peers.
You may think you’ve reached the top; However, your growth stage has only just begun! Going into the growth phase is the hardest work, so applying is something you will have to do at some point. Don’t be scared or nervous, just go for it.
