I am working with, great entrepreneurs at the very early stage of development of their companies, first and foremost for over 3 years now. My focus has always been the consumer Internet space (“Web 2.0″) and plan to continue doing so for the foreseeable future.
By analyzing investment of 20+ Web 2.0 startups both in India & Wordlwide. I’ve learned a lot and even I read a blogs of these people Fred Wilson on AVC , Mark Suster on Bothsideoftable, Brad feld on Feldthoughts and many more.
By analyzing this i understand that developing fundring strategy for startups consumes a lot of time … and it’s tough and its draining process because for that you need to know the different types of investors,Traction that needs to build over the time to raise funding & with all pre-assumption with your early stages of startup
From these learning’s I have tried to figure out what angels and VC are really interested in, and trying to present the best way that I can. (Just because i like Web 2.0 sphere, the opportunities and feel that it is worth the risk)
Here are few assumption for internet products why fundraising is required,
—————- Expenses require for starting up the online companies
Hosting an dbackup cost : you have to buy hosting space and backup from the server that you will be working of.
Personally even if you are a developer, you will probably need help from other developers, net ops folks, visual designers, etc. If you’re not a developer, you’ll need to pay developers.)
Marketing Expenses (you’ll want to attend certain conferences, buy AdWords, facebook ads, send email newsletters, etc. You can get a lot of bang for the buck with social media, but you’ll have some marketing expenses)
Computer peripherals & other resources .Obviously you require a lot of them and legal cost is also matters.
—————-Secondly many online ventures do not generate much (any) cash until a certain scale has been met. As such, having money in the bank to lean on can be a good thing. On the other hand, not having any money helps a company focus on generating revenue, which is the point of having a business.
Angel Investor always start with the people first, they think the ideas that entrepreneurs start with evolve and change dramatically from the beginning and sometimes end up unrecognizable, So its is always better for startups to take time to develop a funding strategy that works for them and for their investors.
So in order to develop funding strategy, startups not only needs to focus on business plan because business plans are dead but to focus the plan that would serve as the roadmap for actions. so these are the assumption
In order to build a product users love and can’t live without, building a breakthrough you need to come up crazy ideas taking risks, optimism, doing whatever it take. Great ideas can’t become great by trying to be great, ideas become great When you work on the factors that makes value to your product.
2. Pivot = A change in strategy without a change in vision, How do you know when it’s the time to pivot your business
A pivot is when a startup decides to change a major part of its business. As a start-up, you’ve got a single mission: demonstrate exponential traction on a yet-to-be-proven business model and strategy. That’s not easy. Execution is difficult. Out-competing everybody is difficult. Trail blazing is difficult. Your idea will sound slick in a pitch deck and your strategy will sound brilliant on paper, so its always better to refine business plan through small tweaks and the pivot because it is something that you are doing.
3. To understand the traction that needs to build before rising seed fund.
Startup are not competing for ideas, excitation and money they are competing for product team incubation/acceleration (Idea and Bootstrap model, Product Market Fit, Prototype devlopement + Angel Investor) All these matters
4. Business Plans
Start-ups with these characteristics have the best chance of becoming enduring companies. So prepare your business plan Business that present a lot of information in as few words as possible.(15-20 slides),.
• Company Purpose (Define the company/business in a single declarative sentence.
• Problem) Describe the pain of the customer (or the customer’s customer). Outline how the customer addresses the issue today.
• Solution Demonstrate your company’s value proposition to make the customer’s life better. Show where your product physically sits. Provide use cases.
• Why Now (Set-up the historical evolution of your category.)
Define recent trends that make your solution possible
5. How to Approach Angels that are good fit for your startups
You need to be out there now building your network and finding the Angel or Angels that are a good fit for you. Angel investing is a 2-way thing and both sides get a lot more out of it if the Angel can contribute and engage. So it’s important for finding the right ones and approaches (directly, politely and persistently).
All these topics are relatively huge & more than 2500 words, so I will look everything in details and in separate post, mean while I assume that I will be able to solve the complexities of developing funding strategy. If you have any suggestions for that then please let me know.