There has been never an exciting time as a student to launch a startup. Entrepreneurship as a subject has started getting prominence in management studies and almost every college or university has its own set of incubators and accelerators. But unfortunately, for most student startups the buck stops at literally not get any bucks into their startup. Here’s a classic story of a student entrepreneurial venture. A eureka moment where a student thinks of a brilliant idea, shares with his friends, presents to his professors. Encouraged by his professors, they make an MVP of the product and receive appreciation and applause. Unfortunately, most of the time, the entrepreneurial aspirations are laid to rest at this stage. The students underestimate the efforts taken to raise capital or they commit the common mistakes of fundraising.
Here, we have put together our observations into 10 Commandments which can refine your fundraising pitch to empower you to raise the seed investment for your startup..
1. Thou shall answer these three questions
At the end of the day, an investor is only looking out for these three answers :
- How big is your market?
- How unique is your solution?
- Why are you the best person to create this solution?
2. Thou shall not seek investment before an MVP
No matter how grandiose your project is, creation of MVP is always possible. Maybe a frugal , concierge MVP would do the job, but seeking investments before your MVP makes you less susceptible to intelligent investors and you miss out on a valuable experience of creating an MVP by yourself with limited resources.
3. Thou shall avoid having a single investor :
Having a single investor is rare and may not be extremely beneficial. But having multiple investors can add a bigger social capital and diverse skillsets to help you achieve your startup goals. Plus, it’s always better to have more people rooting for your Startup success than a single individual
4.Thou shall always choose smart capital
Always ask yourself and the investor the question ‘ What other value can an investor add to my startup other than his money?’ It can be his/her social capital, his/her skillsets , his/her reputation and competencies which would tremendously benefit the startup. An investor’s value isn’t only about the money he puts on the table, but what doors can he unlock which money can not.
5. Thou shalt not fake!
Real people get real money! More often than not, entrepreneurs make ambiguous statements or rely on biased research. When the investors cross validate these statements and they turn out to be untrue, it affects the chances of the startup raising funds significantly! Plus, most of the times the investor circle is close knit, so it becomes challenging to shrug off a reputation of the startup which faked facts.
6. Thou shalt seek money to grow , not to survive :
Always raise money in order to transition towards a better product, expand to a new market or add more features towards your product. Never raise money to settle old debts of your startup , let your revenue be an instrument to pay off the earlier debts.
7. Thou shalt not mistake that funded startup is a successful startup.
Just because you raised investment does not mean you are a successful startup (Yet!) Moving forward, managing investor relations shall take up much of your time and you shall be answerable towards more people other than your team. The speed of decision making might get decreased.
8. Thou shalt keep your burn limited :
Burn rate is the speed at which you spending money per month. Ensure that you are sticking to the burn rate as predicted and projected. An acceptable difference is overshooting your burn rate by 10 % but, in your projections, ensure that you always keep contingencies.
9. Thou shalt raise investment on the merit of your team, not of your idea :
A lot of time , entrepreneurs get confused on whether ideas get invested or them as a team. There are a higher chances that the investor despite not finding the idea credible, they would invest in you as an individual and your entrepreneurial traits. An average idea with a maverick founder has a higher chance of success than a maverick idea but with an average founder.
10. Thou shalt avoid to accept the first term sheet you receive :
Signing a term sheet might be a special moment, but it is always wise to ‘shop around’ with the term sheet you have received to seek other investments which can give you smart(er) money and a better valuation . Buy time from your investors to see whether you can attract other interesting deals from the market. If not, you can always return to the first term sheet!
Fundraising is a daunting and timeconsuming task. Moreover, your social capital and pitching skills play a significant role in raising your capital. At ISME School of management and entrepreneurship, we ensure that our students gets the best exposure to successful entrepreneurs and investors so that raising funds does not become a hurdle, but rather an opportunity to learn! Competitions like pitch it up at ISME, give an opportunity for student entrepreneurs to present their ideas to investors and get a chance to win spot investment!
by Omkar Pandharkame