3 Ways to Succeed at Start-up Fundraising
It’s startling to note that nine out of ten start-ups fail. According to studies, running out of cash is responsible for 29 percent of new business failures, so it’s crucial to get your funding right. These strategies can help you raise the capital you need to beat the odds.
Make the Most of an MBA
Image via Flickr by HowardLake
These days, people aren’t just earning an MBA to land a job with a Fortune 500 firm. They’re using the opportunity to connect with other like-minded students, fine-tune their ideas, and gain access to seed capital.
A 2015 Poets & Quants study found that eight of America’s top start-ups from MBA graduates raised capital of $100 million or more. The number one spot went to Skybox Imaging, a satellite imaging company that raised $500 million after selling to Google. They were followed by student loans start-up SoFi, which, despite being independently owned, used its MBA connections to raise $399 million. Other firms weren’t far behind; more than half of the top 100 raised in excess of $15 million.
MBA students and graduates also have access to a community of entrepreneurs that they might not otherwise encounter. Make the most of this access while you’re studying, and you could also generate the big bucks.
Cold Email Potential Investors
Conventional wisdom says to attend conferences and meet-ups to connect with potential investors. However, Mark McDonald of Appster says entrepreneurs shouldn’t underestimate the power of online correspondence because “many investors have made investments out of a cold email.”
Cold emailing works well as you can make contact with many potential investors quickly and at a low cost. Remember, though, that investors are likely to receive a lot of emails, so you should keep yours brief and craft it well to ensure it stands out.
Address each investor personally rather than sending a mass email. Make sure your email explains your business’ unique value and the problem it solves. Give links to a website or video so they can get more information, and request a call or meeting to discuss the proposition further.
Don’t Waste Time on Lost Causes
Persistence is an important quality for start-up founders, but it’s also important to know when to cut your losses. As Dana Severson, the co-founder of StartsupsAnonymous.com quickly found out, the time spent pursuing a bad lead could be better spent finding a good source of capital.
Severson told Inc. that unless a potential investor shows signs of interest, “there is a 99.9 percent chance they will never invest.” Because of this, you shouldn’t waste time trying to convince people who’ve sent you rejection letters that they’ve made a mistake. Also don’t fall into Severson’s trap of calling an indecisive angel investor seven times. He suggests making no more than three calls in attempts to firm up funding. Finally, if investors are unreasonably late for meetings without warning, walk away. If they’re sorry, they’ll contact you. If not, they were never going to invest.
Operating a successful start-up can be challenging, but fundraising the right way can help your company thrive.
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