By: Shanza Anwaar
On average, it takes newbie entrepreneurs a shocking 37 months to raise funds for their startup. Veteran entrepreneurs fare slightly better at 21 months.
It is critical for entrepreneurs to show expertise with their financials when pitching to investors – it’s a sign that both the entrepreneur and the venture capitalist comprehend one another and that they understand the significance of building a sustainable business that goes along with their star product. By avoiding common pitfalls such as “not using a bottom up analysis or underestimating variable expenses”, startups can successfully pitch to investors and raise capital. Here are 3 fundraising tips to help your business survive this process.
Presenting data: Financial projections are information-dense; therefore data must be presented in an “easily digestible, visual format”. Charts, graphs and tables are an easy way to organize the data. One of the most useful tools in financial modeling is Microsoft Excel and learning to use it can be an asset for all entrepreneurs.
Consistency: Investors want to know a coherent startup story that is void of any “inconsistencies or assumptions that contradict each other”. With that in mind, revising your business plan and making sure your financial projections reflect what you have in mind for your business is essential. Maintaining consistency is vital in order to communicate to outside parties and help build trust in what your startup has to offer.
Be realistic: Most entrepreneurs tend to show data on “rapid growth rates, massive market sizes and underestimated costs”. Yet, lecturer at Harvard Business School, Shihkar Ghosh, declares that “90-95% of the predictions made by entrepreneurs are never realized”. To counter over-optimism, a dose of realism is needed by using up-to-date market research and creating bottom- revenue forecasts. Being clear on what your business has to offer is critical in securing financial resources.
Securing funds for your business is dependent on a well-crafted pitch which includes “easily digestible data”, coherence and honesty. If you’re an entrepreneur seeking business skills training and mentoring on launching your startup, consider applying to RIC Centre’s VentureStart program. Click here to read the rest of the post on “Avoiding Fundraising Fails”.
Shanza joins the RIC team as a Social Media Intern. Pursuing two undergraduate majors in anthropology and professional writing at the University of Toronto Mississauga, Shanza is also a co-editor and content writer at the Digital Enterprise Management Society. She hopes to make her mark as a Social Media Consultant.
The RIC blog is designed as a showcase for entrepreneurs and innovation. Our guest bloggers provide a wealth of information based on their personal and professional experiences. Visit RIC Centre for more information on how RIC can accelerate your ideas to market.