Raising capital for a startup is not a necessary process. If successful, your company will have significant funding, as well as support from investors. However, convincing investors to pour money into your business will never be easy and they will not waste their time on startups with no potential. As an Investment Fund operating under the Venture builder model, Skylink Partners will show founders the mistakes to avoid when raising capital from Venture Capital.
There is no clear business plan or investment strategy
You prepare a business plan full of information but do not have a future development orientation, setting specific goals will make investors bewildered and hesitated when deciding to invest in your business. . What you need to do is develop a detailed business plan and strategy, including long-term future plans, estimated revenue, business methods, and risk estimates.
Besides, many startups often make the mistake of not being able to predict whether their products/services are really suitable and accepted by the market upon launch. You should know that investors understand this very well, so you need to come up with a specific market entry strategy from product testing to official launch. This proves the company’s development potential, founder’s capacity and sustainable competitive advantage in the market… to attract investors.
Raising capital too early
A large portion of startups are often not ready for Angel’s investment. Even, the plan is still unfinished but you have actively called for investment capital, it will definitely fail. We all know that investing in early-stage companies is very risky, but unnecessary risk is unacceptable. Before you apply, make sure you’ve considered all the hypothetical options that underpin your business model. Observe the market’s response to your products and services. Raise capital when you are ready and have enough evidence to convince venture capitalists.
Giving up too many shares for the first fundraising
One of the worst decisions someone can make when trying to raise capital for their business is to give up too much ownership in the company (% of shares). On the investors side, they always want to demonstrate excellent investment ability and bring profits to those who invest in their funds. Therefore, quite a few startup founders get caught up in the vortex of raising capital and forget that the important thing of building a business is not to “brag” about the initial investment, but the goal is to build a business. product development, human resources and revenue generation. Besides, if you sell too many shares of the company in the first round of funding, you will have difficulty in later rounds. Worse, by the time the company succeeds, the founding team will not get the results they deserve.
Inexperienced professional team
Successful capital raising depends not only on the business plan but also on the professional team. An inexperienced team, without teamwork, enthusiasm and energy, is difficult for investors to trust. They are experienced people, able to judge that your staff has the qualifications and responsibility to complete the tasks on time and together to pursue the set goals in a harmonious way. or not…
You should find a way to show investors the qualifications and experience of the staff in the company and prove that the company is capable of implementing the idea into a real product.
Excessive presentation of product features
The biggest mistake in raising capital for startups (especially tech startups) is prioritizing product over business viability. What investors often want to see are customers who really care about the problem you’re solving – the people who pay for your business.
If you’ve built a product, chances are you know every detail and will want to explain it to a potential investor. However, an investor not only invests in the product, but also in your company with the goal of making money. Explain how they get a return on investment when a successful business is the key to helping you reach investors quickly. This means you need a spreadsheet that describes how your business will generate and grow revenue. Ultimately, it’s up to the investor to make sure the company’s vision aligns with what they’re looking for.
Weak communication skills
Fundraising is an extremely competitive process because there are many startups that are in need of funding but the amount of funding is very limited. The founder’s enthusiasm and energy need to shine in the process of communicating with people around: investors, entrepreneurs, advisory boards, other founders, etc.
Whenever possible, use stories and narratives to convey information. The story is more powerful because the listener will put their mind in it and remember the information more than the data. Steve Jobs was a master at this. In his keynote introducing the MacBook Air, he could have talked about its size, but instead he described how it fits in an envelope.
Finally, you need to master the essential information needed to deliver your presentation. Also, prepare questions investors will likely ask you to answer. Remember, the better you understand the industry, business model, risks, and potential “rewards,” the more likely you are to appear trustworthy to investors.
Raising capital too much or too little
Sometimes grant applications are rejected immediately because they are raising too much or too little money. Asking too much raises some concerns. If you are raising a large round but revaluing modestly, your company will be “diluted” and you will lose motivation to grow your career. Investors often don’t want to own the entire company and let the founder work as an employee.
In addition, some startups overvalue their businesses. Founders often confidently negotiate, and value their business through “imaginary numbers”. However, through the eyes of investors, the higher they pay now, the lower the returns later. If your valuation is off-limits, investors can spend this investment capital on other companies that have a better chance of success and return.
The current situation in Vietnam shows that founders often ask for too little money in their first fundraising. While Investment Funds like Skylink Partners often want to pour money into businesses with a minimum capital of $ 500,000. Founders often hope that “lowering the price” will make buying and selling easier. But in the eyes of investors, a small investment won’t get the company to its next big milestone, and the founder looks inexperienced and unenthusiastic about the business.
Founders are not ready to meet investors
Most startups in the early stages are able to operate with equity from the founders because:
- First: it is very difficult to convince investors to pour money into a business idea without authentic evidence They can’t put money into plans based on speculation or hypothesis.
- Second: most start-ups don’t need too much initial capital. Therefore, founders easily manage capital from other sources such as family, relatives, bank loans, etc.
- Third: not all startups can scale. Most venture capitalists pursue models that offer quick success without having to invest too much.
Therefore, if you want to scale, build a team, or develop a product, the founder should meet with investors. When you understand the company’s development needs to come up with a number of capital to call, not only will you be easier to convince venture capitalists, but you will also know what is the maximum capital source. you need to not have to sell too many shares.
Raising capital is difficult and time-consuming work. Even if you prepare everything carefully, the odds of any Angel or VC investing in your company is still very low. However, if you make these impossible mistakes, your success rate is only 0%. You are taking huge risks as a founder. Make sure you give yourself the best chance of success by sharing your heart-to-heart about the mistakes to avoid when raising venture capital.
Skylink Partners start-up investment fund is a member of Skylink Group operating under the venture builder model. Owning a team of experienced core experts in the fields of finance, IT, sales & marketing, Skylink Partners is committed to bringing diverse investment products in the fields of technology, social media, and retail with high quality. , has long-term profitability potential. Therefore, if investors want to accompany or cooperate with us, please contact the hotline 028 6254 9999 or leave a message in the form below. Skylink Partners will support you as soon as possible. Best regards.