Do’s And Don’ts In Start-Up Fundraising – Part II
In my last blog, I focused on speaking to you about the things you must focus on while fundraising for your start-up. Understanding your niche and focusing on acquiring angel investors who know the industry was one of the major points I covered. Being thorough about the details of your start-up and knowing everything there is to know is also extremely important. Now that we covered the “dos” of fundraising, we must cover what you shouldn’t necessarily do while approaching and searching for angel investors and venture capitalists.
1. Don’t overestimate your idea
As an entrepreneur taking risks is a known and sometimes important thing. However, the mistake that some entrepreneurs make is moving into industries and field that they don’t know much about. As such, they go on to overestimate the validity of their idea. What’s important to note is that however much you may think your idea is unique, chances are someone has approached angel investors with the same idea. The uniqueness of the idea is not as important as the execution of the said idea. So keep in mind that having a valid idea and being able to effectively communicate it to angel investors becomes your most important job as an entrepreneur.
2. Don’t expect to land an investor on the first try
There is a reason why securing investors is a tough job. An angel investor must be able to fit seamlessly with your organisation. Even if an angel investor agrees to work with your company, the process of due diligence by them can take weeks or months to complete. So until that process is completed the only thing you can do is focus on your relationship with the investors. See how the investor will be able to help you and your company out not just with their network but through their own experience in the industry.
3. Pressure tactics are a no-no
Sometimes when you are desperate to get an angel investor, you can resort to pressure tactics to pressurise them into making a deal with you. The chances of you actually making a deal with them in these cases are slim. Angel investors have been through these pressure situations very often and often know how to work under pressure. It’s important to understand that since investors are using their own money to invest, they will do everything they can to make sure their decision is the right one. As such, pressuring them hardly works because they realise that they would rather work with a business owner who tells them the truth and is open with them rather than one that pressures them into making decisions.
To Sum Up
It’s not stressed enough that however important gaining angel investors and money is, people skills and being truthful is equally important if not more. To gain the money you need, you have to work in tandem with people and as such you must acquire the skills needed to convince another person to work with you rather than against you. Clear articulation and facts are what will help people part from their hard-earned money.
About Devansh Lakhani
Director of Lakhani Financial Services and a Chartered Accountant helps in start-ups funding India from his network of investors. He guides and advises start-ups to scale up by providing efficient sales, marketing, team building, and business management strategies. Being a business plan consultant he has executed fundraising by block deals on the stock exchange and conducted IPOs and right issues on the SME platform to the tune of over Rs. 50 Crore. He is currently working with start-ups from various sectors to help them channelize their business models and investments.
Check out a blog about Lakhani Financial Services written by Karo Startup here.