You’ve got an idea for a tech business, but lack funding to get it off the ground? It doesn’t help when you hear a random tech startup raised a couple of million dollars even before their product hit the market.
Well, for starters, ignore those 0.002% startups you hear in the news that received funding with no product in sight.
Now, turning to your startup concept – most often entrepreneurs that are currently in your situation aren’t able to ever get their startup off the ground is because they’re thinking too big, too ahead of time.
It’s not always a money problem.
Let’s take a look at first why you need funding at all for your startup. Then we’ll discuss the qualities of an entrepreneur or startup that actually gets funded, what you or your startup can do about it to raise money successfully and what are the various ways to going about raising funds.
Why do you need funding?
I mentioned earlier that often, people are thinking too big too ahead of time. What this means is, that when you’re at the concept stage, you have an untested hypothesis.
Sure, you do have the confidence that your idea has the potential to make multi-million dollars and that your insight or your potential customer interviews prove that.
But, in reality it still is an untested hypothesis until your customers have actually signed up, paid for it and use it on a frequent basis.
Your only goal in the initial days should be to build something and get it in the hands of your customers. Identify what do you need the money for in this case – break it down into smaller chunks.
Developing the website or the app costs money. That’s one. Getting traction or marketing will need some more. That’s two.
I’m now going to show you exactly how to get past both these and ensure you have an exact path to start building on your startup by the end of this article.
But before that, let’s understand who gets funded during concept stage.
Who gets funded?
What’s the make up of an entrepreneur that receives funding while their concept is still untested? They’re someone that have a history of success in the industry of founding and running other companies.
They also have strong investor relationships developed over several years of interaction and engagement.
These are the entrepreneurs that investors are more likely to fund and take a bet on. For everyone else, which is probably the 99.998% of the entrepreneurial population, here’s what you need to do.
What you can do
I’m going to help you get past the need for investor money and still get your product launched.
We established earlier that you need money for mainly two things in the beginning – product development and marketing. Let’s look at what you can do.
Product development: identify what’s the smallest possible product you can build. Call it the MVP or the core value your product offers.
Think as small as possible in terms of features and functionalities – the bare bones – enough to give the first set of users a flavor of your concept and get them hooked.
This should not and will not cost a fortune to build – something that you can’t fund out of your savings or raise some money from family and friends.
Product marketing: what everyone knows is that you run ads (of course, needs sizeable amounts of money) and get traction. What most don’t know is that there are many ways to get the initial traction without spending a fortune.
Some of the things you can do:
Start building a community of potential customers (think: Facebook group) right now. By the time you’re ready to launch, think about the number of engaged users you’d have to test your idea and to sell to!
Leverage social media to share relevant updates about your journey and what you’re building (your value to the audience) with a strong call to action (possibly a webinar or downloadable PDF) that connects with your product’s core offering. Bring this entire audience as well then to your community.
Drum up some press and mentions before launch. Go through HARO every single day and respond to call for quotes that are relevant to your product space. Identify yourself as ‘Founder, <your startup name>’ and provide a link to your landing page.
None of these cost any money.
So, you’ve done all of this, but finally how do you raise money?
How to raise investor money
So, the one thing that you needed to do to raise investor money is exactly what we just discussed. You built a product with minimal amount of money and marketed and got initial traction for almost nothing.
That showcases an incredible amount of resilience, determination, self motivation and being hyper-focused on getting your product off the ground. All qualities that an investor would love to invest in.
Apart from the fact that you can now showcase a product that is tested in the live environment with actual, potentially paying, customers that are growing in numbers week after week or month after month.
While you can continue to sustain this growth by hustling, but if you’d like to scale up at a much faster rate, that’s where you need outside money.
At this stage, look through your LinkedIn contacts, peer over your network offline and find out if anyone is connected to an investor directly or know of a startup that has recently got funded. Get them to make the introductions eventually to the investor – the best possible way to get their attention and time.
There you have it, a path from an untested concept to getting funding. Go get ‘em! And don’t forget to email me and let me know your success story – I would love to share it with my readers.
Article By Rahul Varshneya is the co-founder of Appreneurship Academy – where non-technical founders go to give their million-dollar app ideas a head start. Rahul has been featured in Forbes, Inc, HuffPost, Thrive Global and CIO Review, among others.