common mistakes startups make when applying for funding

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Common mistakes startups make when applying for funding. @Abhishekshah

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There is a perception among entrepreneurs that a revolutionary idea is enough to secure the venture capital needed to kick-start their businesses. This is simply not true. Here are five of the most common mistakes made by entrepreneurs when applying for VC funding.

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Page 1: Common Mistakes Startups Make When Applying For Funding

Common mistakes startups make when applying for funding. @Abhishekshah

Page 2: Common Mistakes Startups Make When Applying For Funding

There is a perception among entrepreneurs

that a revolutionary idea is enough to secure

the venture capital needed to kick-start

their businesses.

Page 3: Common Mistakes Startups Make When Applying For Funding

This is simply

not true

Page 4: Common Mistakes Startups Make When Applying For Funding

Here are five of the most common mistakes made by entrepreneurs

when applying for VC funding.

Page 5: Common Mistakes Startups Make When Applying For Funding

1. No WOW! Factor

Page 6: Common Mistakes Startups Make When Applying For Funding

The first rule in the VC game is that your

business proposition must have an

exceptional differentiating factor.

Page 7: Common Mistakes Startups Make When Applying For Funding

You need to know what your sustainable

competitive advantage will be.

Page 8: Common Mistakes Startups Make When Applying For Funding

If you’re trying to raise funding for a

conventional business or idea like a franchise or

service business . . .

Page 9: Common Mistakes Startups Make When Applying For Funding

VC is probably not the right place to start looking.

Page 10: Common Mistakes Startups Make When Applying For Funding

For the best chance of success

1. No WOW! Factor

for

Page 11: Common Mistakes Startups Make When Applying For Funding

1 Be sure your business has that x-factor

Page 12: Common Mistakes Startups Make When Applying For Funding

2

understand what industries or types of businesses VCs are willing to fund

a

Do your Research

Page 13: Common Mistakes Startups Make When Applying For Funding

2 Do your Research

b

Call them first to clarify before applying and wasting both your time and theirs.

Page 14: Common Mistakes Startups Make When Applying For Funding

2. Expecting a 24-hour turnaround

Page 15: Common Mistakes Startups Make When Applying For Funding

A large number of applicants turn to VC

funding at the eleventh hour as a last-ditch

effort before running out of capital.

Page 16: Common Mistakes Startups Make When Applying For Funding

Securing VC funding is not for the impatient:

Business analysis, building the investment case,

approval, due diligence, and legal and financial

structuring are undertaken with

meticulous care and attention to detail.

Page 17: Common Mistakes Startups Make When Applying For Funding

Plan for a longer process than you imagined as it could take a number of months depending on the deal size and stage

of the business.

Page 18: Common Mistakes Startups Make When Applying For Funding

2. Expecting a 24-hour turnaround

For the best chance of success

for

Page 19: Common Mistakes Startups Make When Applying For Funding

1 Don’t leave it to the last minute -- VC funding is more difficult to secure if it’s

seen as a last-gasp effort.

Page 20: Common Mistakes Startups Make When Applying For Funding

2 Plan for the long run -- get to know

the VC funds and managers. The vast majority of deals are done through referrals and existing relationships.

Page 21: Common Mistakes Startups Make When Applying For Funding

3. Touting an untested idea

Page 22: Common Mistakes Startups Make When Applying For Funding

VC analysts and fund managers are unlikely to

be swayed on the strength of a business

plan alone.

Page 23: Common Mistakes Startups Make When Applying For Funding

For the best chance of success, develop a

working prototype or some basic software.

Page 24: Common Mistakes Startups Make When Applying For Funding

VC funds respect entrepreneurs who have

risked their own funds and resources to get their big idea off the

ground.

Page 25: Common Mistakes Startups Make When Applying For Funding

For the best chance of success

for 3. Touting an untested idea

Page 26: Common Mistakes Startups Make When Applying For Funding

1 Before hitting the VC trail, build that prototype or get your software to a

test group.

Page 27: Common Mistakes Startups Make When Applying For Funding

2 Develop a solid business plan that

clearly spells out the potential for your unique solution to a specific market’s

burning need.

Page 28: Common Mistakes Startups Make When Applying For Funding

3 Avoid jargon in your business plan, make doubly sure it’s free of errors,

and tailor it to the fund’s specific mandate.

Page 29: Common Mistakes Startups Make When Applying For Funding

4. Neglecting the real numbers

Page 30: Common Mistakes Startups Make When Applying For Funding

A solid business plan is not based on assumptions.

Page 31: Common Mistakes Startups Make When Applying For Funding

VC funds want to see market research

reflecting real data to back the financial

projections.

Page 32: Common Mistakes Startups Make When Applying For Funding

They want to fund entrepreneurs with an in-depth understanding of

the market . . .

Page 33: Common Mistakes Startups Make When Applying For Funding

both locally and internationally.

Page 34: Common Mistakes Startups Make When Applying For Funding

For the best chance of success

for 4. Neglecting the real numbers

Page 35: Common Mistakes Startups Make When Applying For Funding

1 Do your own research -- this gives you better, direct insight. There is plethora

of online tools that enable you to gather data quickly and affordably.

Page 36: Common Mistakes Startups Make When Applying For Funding

2 Be sure to do a detailed competitor analysis, where you compare your solution to others on a feature-by-feature basis. Also consider future

territories and include relevant data and sources.

Page 37: Common Mistakes Startups Make When Applying For Funding

5. Lacking a clear development path

Page 38: Common Mistakes Startups Make When Applying For Funding

Too few entrepreneurs have a clear

understanding of how much funding they

actually require for the next stage of their

business.

Page 39: Common Mistakes Startups Make When Applying For Funding

And sometimes are even unclear about what the

critical goal is that the funding is to help

achieve.

Page 40: Common Mistakes Startups Make When Applying For Funding

You lose credibility if you return to the market for

more funding without having made significant

progress.

Page 41: Common Mistakes Startups Make When Applying For Funding

For the best chance of success

for 5. Lacking a clear development path

Page 42: Common Mistakes Startups Make When Applying For Funding

1 Be clear about why the funding is needed and what it will help you

achieve.

Page 43: Common Mistakes Startups Make When Applying For Funding

2 You need to determine how much

actually need and not how much you think you should raise based on ‘norms’ — the more you raise in the early stage of your business, the more equity you

will have to give up.

Page 44: Common Mistakes Startups Make When Applying For Funding

3 At the same time, make sure you raise enough to get you to the next phase, and work on the funding carrying you

for 18-24 months.

Page 45: Common Mistakes Startups Make When Applying For Funding

Now avoid these Common mistakes