Angel investors are people who provide seed-stage or pre-seed stage funding to startups for a certain amount of equity ownership in the startup. They are usually high net worth individuals, that provide financial backing to idea stage and early-stage startups, through equity (common) and debt (rare).
Venture capitalists (VCs) are investors who invest in high growth companies that have the potential to disrupt to status quo of the market. They could be high net worth individuals, private equity firms, and investment banks. They usually come in the picture after the seed stage of a startup, and invest when the startup’s business model is proven, has customers, and growth.
There are many sources of money available in the market, but for raising money you should be investor-ready.
1. You should have an investable idea or business.
2. It should solve a problem, be unique and scalable.
3. Know who is the right investor for you.
4. Be investor-ready- have all documents ready, the pitch deck, financial model, and a business plan.
5. Prepare for The Pitch.
A Pitch Deck is a primary introduction document about your startup, venture or business idea that you send to a secondary body such as an investor, could be an angel investor and a VC, or a bank when you want to raise capital or funds for your startup.
You have to make sure that you have the best pitch deck for your startup presentation, it should convey your story, should be crystal clear, easy to understand, informative, to the point and convincing.
To make a pitch deck you have to do your market research, understand what investors are looking for, strategize how you are going to convey your story through your pitch deck, how you will stand out. Having a professionally made pitch deck increases your chances of getting the investor meeting and funding.
Financial Model is a customized built document or model which includes your revenue projections, expenses of the coming financial years, cost of goods sold, spend on marketing, cost to acquire a customer, projected balance sheets, startup valuations, and funds required at this stage.
It is custom-built for each and every startup, as different startups have different business models and different entrepreneurs have unique plans and strategies to expand and launch.
A financial model is to be only made by an expert because it has to be reliable and based on facts and market research. You should be able to explain everything to the investor when presenting, hence before building your financial model it is important that you understand all these concepts and take the help of a professional.
Different sources of finance are as follows:
2. Friends and Family
3. Crowd Funding
4. Angel Investment
5. Accelerators and Incubators
6. Purchase order finance and bill discounting from banks
7. Venture Capital or Venture Debt
8. Initial Public Offer (IPO)
If you want to know more about how to do fundraising, contact us.
Different investors look at different metrics for evaluating a startup, depending upon their own set of criteria, stage of the startup, and industry. But you can follow a simple PERSISTENCE framework to identify your startup is investable a not.
Problem- your idea and business should solve a problem and pain point of the customers.
Earnings model- your idea and business should have a good solid revenue model.
Risks- you should know the risks of the startup and the market you are in.
Size- your target market should be large enough for growth.
Innovation- your solution in form of product and service should be unique.
Scalability- your startup should be easily expandable.
Team- you should have a diverse team, having expertise, and a clear set of roles and responsibilities.
Entry Barrier- your startup must have an entry barrier for other companies to execute the same thing.
Niche- if the market is very much competitive, the startup should target a niche of the market, and should have a differentiated set of customers.
Traction- your startup should have some amount of traction.