How To Raise Capital For Your Startup: A Simple Guide

Raising capital is critical for entrepreneurs at all levels. The ability of entrepreneurs to reach people with their ideas, products, or services depends on their ability to raise capital. I think raising capital is now easier for investors. While in the past it was both a long and difficult process for a startup to become a successful business model, I can say that today there are many options for raising capital.

Before raising capital, you should be ready with a detailed business plan. Then it would help if you were a participant in the networks where you will connect directly with investors. There are many funding methods. Thanks to these funding methods, startups become successful business models and are profitable for both entrepreneurs and investors.

The most common funding methods are angel investors and crowdfunding. What is important is that your startup is presented well and effectively to investors. Investors also want to believe that they are a good and successful project because they also earn a certain amount of income in case of possible success.

What Are The Best Ways To Raise Capital For A Startup?

Raise capital startup

The best-raising capital method for a startup may vary. However, I can still mention some common methods. There are many raising capital methods, from angel investors, venture capital institutions, crowdfunding projects, and traditional loan packages of banks to our environment. It is the entrepreneur’s responsibility to determine which of these methods is best for your startup project.

As a startup manager and entrepreneur, you should first prepare a business plan and determine the amount of capital you want to collect. Then, you should prepare a schedule for this raising capital process. You also need to have an effective introduction or presentation for your purpose of collecting capital through different investor channels such as angel investors and venture capital companies.

Although these raising capital methods consist of units that fund projects that they think can be successful, their persuasion is of critical importance. However, if you want to complete the funding or raising capital process with your network or family other than professional funding methods, the persuasion process here may be easier. The best raising capital method may vary depending on dynamics such as the field your startup is in and the scale it serves.

How Do Angel Investors Help Startups Raise Capital?

One of the most popular raising capital methods, angel investors are a funding method that provides the capital needed by the startup team from the establishment phase of a startup. Moreover, angel investors do not only provide funding. They also provide the mentoring needed during the establishment and expansion phase of the startup. For this reason, young entrepreneurs usually look for angel investors in the sector in the early days of their startup projects.

The biggest difference between angel investors and other raising capital methods is that they do not only provide capital. Unfortunately, offering a good idea, product, or service in today’s competitive markets does not mean experiencing a successful startup process.

Each market has its special conditions and difficulties. At this point, young entrepreneurs need guides like angel investors. When the startup turns into a successful business model in the future, angel investors also earn a certain amount of income in proportion to their investments and consultancy.

How To Raise Capital Through Crowdfunding For Your Startup?

Another popular method of raising capital is crowdfunding. Today, crowdfunding platforms and events are periodically organized in different countries of the world, both online and physically. Through these platforms, it is possible to turn your startup project into a real business model thanks to mostly small-scale investors.

For your startup to be funded with the crowdfunding method, you need to manage effective communication and promotion processes on crowdfunding platforms. At the same time, you may also need some marketing strategies at this point. It is of critical importance to be able to attract the attention of investor participants on crowdfunding platforms.

If you collect small amounts of investment from dozens of different investors for your startup on a crowdfunding platform, when your startup project turns into a highly profitable business model shortly, each of these investors will have received a promise from you to earn income in proportion to their capital contribution.

Many successful companies today have gained their current strength through crowdfunding. When a successful startup supported by multiple investors on crowdfunding platforms becomes strong to a certain extent, each investor receives stock or income proportional to their investment. This common funding method is still widely used by entrepreneurs.

What Are The Risks When Raising Capital For A New Business?

Raising capital business risks

Establishing a new business, managing a startup or raising capital in other entrepreneurial activities also carries some risks. Today, thousands of startup projects are being established from scratch in different markets at the same time and are being developed with other strategies. Some of these projects disappear. Because these startup projects lose control during the raising capital process.

The possibility that a startup project will not turn into a successful business model is always a risk for the raising capital process. Therefore, it would be good to have some agreements against possible bad scenarios when communicating with your investors.

In some cases, entrepreneurs should consider risks such as the debt burden being too much for the entrepreneur’s financial situation, investors psychologically preferring a suppressed language in communication, and possible growth expectations pushing investors to despair during the raising capital period.

How Can Entrepreneurs Attract Venture Capitalists To Raise Capital?

One of the most common methods of raising capital is to develop interactions with venture capitalists. Entrepreneurs should use some tips to attract the attention of these types of investors. The most critical issue in attracting the interest of venture capitalists is that your startup project has the potential to grow financially. If the startup project does not have the potential to grow, the entrepreneur’s chances of attracting the attention of venture capitalists will decrease.

I should mention having a good team. If you want to collect the capital you need as an entrepreneur in your startup process and turn it into a successful business model, it is possible to impress the venture capitalist with a compatible team.

In addition, it is also critical that the product or service offered by your startup project is a differentiating and original solution in the market. In today’s digital world, there are thousands of startup projects managed with the same idea. For venture capitalists to invest in your startup, they need to be convinced that the product and service offered by your startup will turn into a profitable business model through a good presentation.

What Documents Are Needed To Raise Capital For A Startup?

Startup projects may also be managed in university incubators, or they may be managed by a single person via a computer. Due to this large scale, raising capital processes for a startup project should not be explained singly. However, I can still list the documents you need in general for a startup raising capital processes as follows:

  • A detailed work calendar should be created. Expectations and possible scenarios regarding the raising capital process should be prepared in this calendar.
  • Investment presentation is the most critical element. You should not compromise on the pitch deck, you should have the best and most effective presentation. You have to attract the attention of investors in competitive markets.
  • Your presentation file should include financial instruments such as income and expense statements.
  • The legal intellectual or other property documents of your startup project are also legally important. 

As an entrepreneur, you should have obtained all the legally required documents and approvals for the startup project you manage. You should not have any deficiencies in this regard in a possible raising capital phase. 

In addition to these documents and legal processes, your startup project also has an ethical responsibility. For example, being ethically compliant with sustainability principles, a popular business area in recent years, will be both more financially profitable and will cause less damage to our planet. Not only financial concerns but also social and ethical concerns are at least as important as the documents.

How Long Does It Take To Raise Capital For A Startup?

Raise capital for startup

The length of time it takes for a startup to raise capital varies depending on many different dynamics. However, I can still give an average time. An average startup project will usually take between 2 months and 1 year to raise capital.  Extending this period will reduce the realism of the startup project. However, many projects complete the raising capital process in less than 2 months and turn into a successful business model.

Entrepreneurs who manage startup projects in areas such as technology, artificial intelligence, the internet, internet banking, and online dating applications complete their raising capital processes in much shorter periods than those who seek solutions for more traditional issues. 

Therefore, the time it takes for a startup to complete its raising capital process varies. For this reason, there is no single answer to the time frame in which a startup should complete the capital raising process, depending on different dynamics and sectors.

What Are The Alternatives To Traditional Funding When Raising Capital?

Unlike traditional funding methods, there are many ways to raise capital in today’s digital world. Alternative raising capital ways include collaborating with angel investors, participating in government or other official institution grant programs, and crowdfunding platforms. In addition to these popular funding methods, crowdfunding can now be done in many different ways.

Depending on the sector your startup project serves, you should determine which of these funding methods is most suitable for you. While angel investors are generally more suitable for entrepreneurs who need mentorship and roadmap determination, government grants can also be life-saving if the project is likely to contribute to the country’s economy.

Thanks to the new and innovative solutions opened by the online world, entrepreneurs can now complete their raising capital processes easily and practically without having to physically visit different institutions and capitalists. Therefore, it is the entrepreneur’s responsibility to follow online venture and capital summits or groups such as crowdfunding platforms.

How To Successfully Pitch To Investors And Raise Capital?

To successfully pitch investors, a startup must be ready for a good presentation. I wouldn’t be wrong if I said that presentation is one of the most critical cases for a startup. Whether it’s an online or physical raising capital process, an effective and successful presentation is the most important requirement for investors to perceive your project as a real business model. So how should the most effective and successful startup presentation be? What are the advantages it will provide in the raising capital process?

First of all, you should create a clear, simple, and attractive presentation language. The presentation should be short and effective. Since many investors are exposed to dozens of project presentations every day instead of being interested in just one startup project, being short will be a useful tip.

You should explain your growth potential realistically. We should not forget that investors support you to be financially profitable at the end of the day. For this reason, entrepreneurs need to show more strongly the possibility of their startup projects turning into an effective business model that can be financially profitable. You should also emphasize the competencies and originality of your project and team.

How Much Capital Should You Raise For Your Startup’s Growth?

Raise capital startup growth

Almost every young entrepreneur at the beginning level is very curious about the answer to this question. However, when we look closely at all successful startup stories, the common feature that we should be inspired by is that they continue their raising capital processes patiently and steadily. It is really difficult to answer the question of how many months and how long it will take for my startup to become a successful business model.

Different startup projects will have different capital processes. Since each startup project has different dynamics, the answers to questions such as how much capital needs to be collected and how long it should be completed will be different.

For example, a team running a startup in the field of artificial intelligence or machine learning may not need the same amount of capital as a team running a startup in the field of volleyball. Both the way they work and the amount of investment required for the technologies they use vary.

See you in the next post,

Anil UZUN