This article is written by Munira Hussein, a Contributor Author at Startup Istanbul.
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A startup is a company seeking a business model. Business model refers to the ability to deliver value and capture value back. Many companies don’t monetize until they are sold. This means that they increase their value by capturing value.
When fundraising for your startup, you plan for what you want to do with the money and how to invest it but there is a question you might not have asked yourself frequently enough. It isn’t greatly about how much or what you’re doing with it but what are the final result that you’d like to get with that money at every specific moment.
Investors take several factors into consideration when investing. They look at the team, market and technology. Every team should have the hustler, the hacker and the hamster. The hustler is the one with the idea. He/she is the troublemaker, the one with the disruptive idea. Hustler makes the product palatable and useable by the customers. The hacker is the tech person who gets the applications and codes together. The hamster are people that can put things together, the organizers and mobilizers. It is not just about the funding team, it’s the people that are able to attract the funding team.
The market should be scalable. It should have the prospects of thriving in the current and surviving in the future. This means that you have to go big on technology with no high risk. Other times, there are high risks involved and you should explain the scope of the risk to your potential investors.
Show your investors that your team is proactive in idea generation and execution. That they know how to perceive reasonable ideas, use linear startup and focus on customer needs and demands. Understand the stages of customer discovery, customer validation and customer creation. In the customer creation phase, learn what generates income.
Before you seek funding, put a little bit of your own money into your business. Then you can proceed to friends, family and other investors. Investing your own money is proof that you believe in your venture and it makes it easy for others to buy into it.
If your idea is uniquely marketable, you can get money from the market. In case your idea needs a boost in marketing, seek funding. Once you get the funding, have a record of how much you are spending per month and per week and on what you are spending. Assess how long your company is likely to run for before collapsing, based on your expenditure.
Finally, when asking, don’t ask too small. This might be taken as a reflection of your small thinking. It could also mean that you might be unable to deliver. If you ask too soon into the business, it shows that you do not understand the dynamics of your business and not reaching the activation level. Find your threshold. What is the minimum amount of money you need to raise for your business to run?