One of the biggest mistakes you can make when raising capital - and especially when raising seed capital for your startup - is not giving yourself enough time. That comes at the expense of your pitch deck for investors, and on top of that, you don't always make the best decisions under time pressure. And if you're unlucky, it's even the end of the story before you get an investment in. To avoid this, we describe how the funding process works and how long it usually takes to get funding. A heads up: it doesn't have to take a year.
Simple step-by-step plan for start-up capital
While raising funding is not always straightforward, the process of obtaining startup capital is simple to make. In 9 out of 10 cases, you take at least the following steps as a (start-up) entrepreneur:
1. Collect data and prepare documents
A funding application starts with a good business plan. That is exactly what you focus on in the first step. Gather data about the past period and the future, such as the market, competition, customers, trends and developments. Also think carefully about the amount of money you need and what you will use it for.
2. Create pitch deck for investors
You are going to create a pitch deck for investors; a short presentation you use to share your plans with potential backers. Basically, it's a short summary of your business plan. You can find all kinds of videos on the Internet that can be good pitch deck examples for you. Among other things, tell something about your team, the challenge you face, your investment needs and your product/market fit.
3. Seek contact with investors
This is a step that you, as an entrepreneur, must continually work on. After all, it is usually not enough to send an email to an investor asking if you can drop by. Put time and energy into maintaining valuable relationships with investors or people who can get you to the table with investors.
4. Engage with investors
A logical next step is to make your pitch to investors. This is your chance to show why they should engage with you. The more often you sit down with investors, the better you become at these conversations. Prepare well for possible questions they will ask!
5. Be patient. A lot of patience
Investors like to know what they are putting their money into. That's why they request many documents from you, such as tax returns or comprehensive market analyses. This is called the due diligence process. This process can be quite lengthy. It feels that way mainly because you have very little influence on it yourself.
6. Negotiating and receiving start-up capital
If you've had the first 5 steps and the investor wants to do business with you, it's time to negotiate the terms of your seed capital. You have wishes and requirements, as does your investor. The challenge now is to agree on the terms.
How long can capital raising take?
As you can see, raising capital for your business is not a job you do in a hurry. Of course, exactly how long it takes depends on a lot of factors: the size of the investment, your relationship with investors and even the time of year. Some investors get it done in 1.5 months, sometimes it takes up to 9 months.
Give yourself time for the capital injection
You are the most important link in securing the injection of capital to grow your business. After all, you are the entrepreneur with the idea, passion and conviction. You need to get this across to potential investors.
It's good to realize that you probably won't just sit down with the ideal investor. Or that you'll bite the first time you talk to an investor. That is why it is extremely important that you give yourself time.
Plenty of time to prepare properly, have conversations with investors, and finally successfully conclude negotiations.
If you don't, it becomes more difficult on all sides. You don't have enough time for proper preparation, so you end up with fewer investors or none at all. And if 1 of those investors bites, chances are you'll have to add more water to the wine than you thought of beforehand. So start on time!
Become investor ready?
Are you at the beginning of your investment adventure and looking for seed capital? Then download our white paper and find out what it takes to get investors to commit to you!
Do you need funding to make your innovative plans a reality? With our experience and extensive funding network, we support you in finding investors.
In this white paper:
- What challenges do you face and how do you deal with them?
- Becoming investor ready in four steps!
- An overview of all funding options
Please note that this whitepaper is only available in Dutch at the moment. We are in the process of translating this whitepaper.