3 Major Startup Financing Challenges And How To Solve Them
Every startup will need funds to start and to maintain a company. Funding is arguably the most important aspect of any business at all stages. Many startups face a series of financial challenges at the onset of their business; it is almost inevitable. This is reason enough to know the major startup financing challenges. You will also understand how to solve them.
There is no alternative to funding so you must go through the process to be able to grow your business. If this is the case, you will do well to be prepared.
There exist this optimism and positive vibe that comes with starting a business. People are excited and they are very serious until the issue of funding rears its ugly head. If you can survive that time without losing focus and maintaining your optimism, you will pull it off.
Most times, startups depend on investors to get their companies going. To this end, they hustle for the right investors to pitch. This is where it might become a problem.
According to Bill Rader, president, and CEO of Efferent Labs, “Getting in front of the right investors is always a challenge, but even when you do that you’re also competing against a lot of people for the same money.”
Therefore, you may not have to depend entirely on investors. A lot of success will come from self-funding. It is an important aspect of the business survival and you will get investors or not along the way.
You may not be able to raise the money you need on your own even if you have had success in the past. You will need to become part of your business community to do that. it helps you in unimaginable ways.
You will to radically network as that is key to the survival of the business and its success. Reach out to more people and you will be fine.
We want to discuss the 3 major startup financing challenges. They always rear their ugly heads and if are not careful, you may not survive them. We will also talk about how to overcome them.
These major startup financing challenges affect almost all the business at their infant stage.
How To Solve The 3 Major Startup Financing Challenges
Landing the right investor
Finding the right investors who will be willing to back your business as a startup is unarguably the biggest challenge startups will face. It is a key aspect of the major startup financing challenges.
You will do well to know that it is not every investor that is right for your company. Some are just not right for you so getting investors is quite different from getting the right investors.
According to Jayna Cookie of EVENTup, “it’s important for business owners to think about their financing options. It can be tempting to jump at every company that’s interested, but this may not be the best use of time. You need to ask yourself what companies they are investing in and at what stage.”
You will need to do some research so as to determine the kind of angel investors and venture capitalists that you will try to pitch. They are the people you will give your time. It doesn’t make sense spending all the time on people that you don’t need and in the vein, don’t need you too.
The challenge obviously is getting the right investors. To solve this challenge, you will be strategic in going after investors. It is important so that you will end up with the right people for your business.
Network all the time
To raise funds, you will need to network. Networking is at the base of financing your startup. Networking here simply means forming alliances and relationships with companies that can be mutually beneficial.
If you want to grow your business, you will need others to do that. You cannot, in all honesty, do that on your own. You will need to explore all the strategies for developing a healthy and working relationship with other companies.
Cooke summed it up when he maintained that “Your best introduction is always going to be from another entry that potentially has raised money from the same firm. Today an entrepreneur has a lot of opportunity for getting their ideas out there, there’s a lot of soft money lying around. You have to get out there, you have to do some work, and you have to enter these competitions. … It comes with a lot of practice.”
Have an exit strategy
Cooke suggested that having an exit strategy can help provide more opportunities for funding. By having clear goals set and an idea of where you want to be in the future, you can potentially consider other funding options.
“I wish … I had reached out to more people, maybe on the peripheral of our industry and [said], ‘Oh, this may be a company that we can work within the future,’ whether a partnership or an acquisition.”
Having an exit strategy plays into other advice Cooke has for new companies: Make sure you have a plan. While every business is different, having defined parameters on how much money you need and what you need it for can help you as you approach investors. Cooke said she had everything outlined and clear before she began talking to investors, and that she ended up asking for about 20 percent more than her company needed to account for any problems that could arise.