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What should you do if you can’t raise startup capital?

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What should you do if you can’t raise startup capital?

  December 10, 2019
 

Raising startup capital can be crucial if your business requires a certain critical mass to survive. Unfortunately, more companies fail to raise capital than those who successfully do. The good news is that there are a million ways to raise money and you only need one of them to work. Today, we’re going to talk about what to do if you’re having trouble raising startup capital.

We first need to address the fact that most people go out looking for funding far too early. If you’re serious about raising money and don’t have a successful acquisition under your belt, then there are a few things you need to accomplish before you ever reach out to investors. For starters, you at least need some sort of initial version of your product/service and ideally a concrete proof of concept. Your proof of concept doesn’t need to be a million people using your product but it does need to be some people using your product, giving you regular feedback. This shows investors that there’s actual demand for what you’re offering.

1. Stay close to home: One thing we see all the time is hopeful entrepreneurs never actually tapping the full potential of their network. Most people don’t realize it but they almost invariably have a group of people around them who want to back their ideas and believe in them. If your family and friends aren’t willing to invest in your idea, why would a professional investor? Jeff Bezos’ parents mortgaged their home and invested over $200,000 into Amazon while it was still nothing but a pipedream. If you haven’t already tapped your network and asked your friends and “friends of friends” then it’s too early to be going to investors. Also, if you haven’t gone to your family then it’s definitely too early to be going to investors. Keep in mind you don’t have to ask for a lot of money but, in most cases, you can get enough to at least show proof of concept.

2. Get creative: If your friends and family have already helped you and you still can’t get investors behind you then now it’s time to get creative. What do we mean by getting creative? Well, let’s look at a great example. Back around the 2008 presidential election, Airbnb was nothing more than a fledgling startup that was struggling to stay alive. The founders had already raised money from their family and racked up thousands of dollars of credit card debt in order to get their proof-of-concept off the ground. Even after doing all of that, they weren’t able to raise money from professional investors. So what did they do? With the election right around the corner, the founders thought fast and devised a money-making strategy completely unrelated to Airbnb’s business. Brian Chesky and his co-founders created special label cereal called “Obama O’s” and “Cap’n McCain’s” and sold nearly $30,000 worth around the time of the election. They used this money to keep Airbnb alive until they could convince investors to join.

3. Crowdfunding: Speaking of getting creative, crowdfunding is one of the most creative things you can do. Up until the last 10 to 20 years, if you had a great idea you had to go through industry gatekeepers to get your idea funded. The advent of the internet changes all that. Never before in human history have normal people been able to get their message out to millions, without spending much money. Crowdfunding isn’t just for small projects anymore either. Over the last 10 years, crowdfunding has helped raise billions of dollars for promising startups and business ideas. If you thought your company wasn’t a good idea for crowdfunding you might want to reconsider. This can be the basis for a multi-billion dollar company. Sites like IndieGoGo, Kickstarter, and many others now make it ridiculously easy to set up a campaign. Even if you don’t hit your target, it’s worth a shot.

4. Persevere: The next thing you may want to consider is that you just haven’t tried enough times yet. There are countless stories of brilliant entrepreneurs who had to try many more times than they thought to get their idea across. For example, Tim Ferriss was turned down by 26 publishers before one picked up his book The Four Hour Work Week, which went on to be a global phenomenon. How could so many publishers miss out on a homerun opportunity? It’s hard to know, but the one thing that’s for sure is that if Tim would have given up on his twenty-fifth publisher no one would probably know who he is. How many pitches have you made? Probably not enough. Even if you pitched a hundred investors, the hundred and first might say yes. So our advice is to simply persevere and never give up.

5. Ask for feedback: This is one tactic we can promise you not many entrepreneurs use. After every single investment decision, you get you to need to be asking investors, “Why did you say no? What can we do to improve?” These two questions can unlock the sea of doubts that investors are thinking about when they’re reviewing your opportunity. Once you’re able to understand why they’re saying no, you can go back, adjust your messaging, and then knock the next pitch out of the park. While it might seem obvious, most entrepreneurs don’t do this. They make the same pitch over and over hoping one investor will just say yes. However, if you improve after every single pitch, you’ll eventually land in a meeting where everything goes perfectly, you address every concern, and investors are nipping at your heels to get involved.

6. Know when to quit: Last but not least, unless you want to spend the rest of your life pursuing this idea, have the courage to know when to call it quits. This doesn’t mean you’re giving up on your entrepreneurial aspirations, it simply means that this idea, at this particular time, isn’t going to work out. If you can make that distinction and then act quickly on it you could save yourself years of pointless work and move on to your next venture. Don’t get this confused with someone who simply jumps from idea to idea but understands that if two-hundred investors have told you “No,” even after improving your pitch every time, then there might be a fundamental flaw in your plan. Chalk it up as a learning experience and move on to the next. Your odds of success will be dramatically higher, after all, you’ve learned.

Do you have one more pitch in you?

At the Tandon Group, we’ve invested in dozens of successful companies in the consumer, defense, wireless, and IT industries. We’re always looking for the next big opportunity and can especially help emerging startups expand into the Indian marketplace. With offices in Silicon Valley and multiple offices across India, we’re truly a global investment partner. If you think you have what it takes to be the next big success, reach out to us. We’d love to be your partner for the road ahead.

Tandon GroupWhat should you do if you can’t raise startup capital?

Indian Crowdfunding Opportunities

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Indian Crowdfunding Opportunities

  May 1, 2015
 

Prior to having a proof-of-concept, raising capital for your startup can prove very difficult. Most professional and institutional investors want to see working products and market validation before they’re willing to invest in any capital. This can turn into a paradox — you need money to build your initial product or service but you can’t get money without having an initial product or service. There are ways, however, to raise capital and prove your concept, at the same time.

What is crowdfunding?

Crowdfunding essentially lets you raise money from future customers (or fans), prior to building your product or service. These micro investors, commonly known as “backers”, pledge money to your cause in exchange for one of the first products, to gain access to your work before anyone else, to be recognized as a backer, or any number of other creative reasons. 

Why has it become popular?

Crowdfunding has become popular in recent years due to the fact that you can start a company and prove the concept, without risking almost any assets. Another reason crowdfunding has become popular is that you do not give up any equity in the company in exchange for the money. Therefore, a successful crowdfunding campaign means you get the necessary capital to build your product or service and you still maintain full control of your company. These factors make crowdfunding a great option for products or services that serve end consumers. 

What opportunities work best for crowdfunding?

Crowdfunding is most viable for B2C companies because of the fact that you need a large consumer base to be able to pledge money to your project. B2B companies usually have limited success using crowdfunding because there is not a large consumer base to get backers from. However, there have still been some B2B crowdfunding success stories such as Bitvore. Some of the best crowdfunding campaigns of recent history have included 3D printers, vaporizing pens, short movies/documentaries, smart devices, electronic gadgets, and other consumer goods. 

How crowdfunding can help you land future funding

Crowdfunding platforms are one of the best arenas for startups to prove their concept. When you’re able to induce 10,000+ backers to pledge hard-earned cash to your product or service, this is a great sign for the viability of your company. Angel investors and venture capitalists love to see a successful crowdfunding campaign because it means that there is a real need or desire for your offering. Most successful crowdfunding campaigns will not have a hard time raising further venture capital if they’re willing to exchange equity for it. 

How to spread the word about your crowdfunding opportunity

There are a million ways to get the word out about your crowdfunding opportunity. The most successful strategies involve some sort of social virality. Ideally, you have an initial niche base of people that you can market your project to who, in turn, will share it with their friends (who may not be immediately involved in that industry). If you want more in-depth knowledge on how to spread the word about your crowdfunding project, take a look around online as many comprehensive guides have been written. 

List of crowdfunding companies in India:

Financing After Crowdfunding

If you’ve run a successful crowdfunding campaign and are looking for further capital to expand your business, the Tandon Group can help. We’ve invested in dozens of startups in the technology, wireless, consumer, defense, and IT industries. We’ve had successful exits and are always looking for the next promising startup. If you believe that your company is going to be the next household name, reach out to us. We’d love to be your partner for the road ahead.

Tandon GroupIndian Crowdfunding Opportunities