Fundraising is a daunting challenge, even for the best finance professionals, and downright scary for startup founders with no finance experience. According to Fundable and Entrepreneur, 565,000 startups are launched every year and just under 3% receive angel and VC investments. Entrepreneur identifies three main reasons startup founders fail to secure funding that we further address in this article and the corresponding video.
1. Lacking defensible financials and a credible valuation
Most startup founders don’t know finance and can’t properly translate their business plan into proforma financial projections. The reason is obvious: in order to create a disruptive product, you must be REALLY good at what you do, and you can’t be REALLY good at everything.
However, this gap in expertise leads to founders not effectively communicating their vision to investors in the language that investors understand - which is finance and accounting. Investors relate infinitely more to details on unit economics and valuations than the intricacies of a complex C++ algorithm.
The Startup Station specifically focuses on addressing this gap.
2. Underutilizing your team
Finding the right people – the people whom you can trust, who share your vision, and who are experts in what they do is not an easy task for any company but is especially critical for a startup.
Once you put together the right team, we recommend being creative and open in how you utilize them because you only have access to a limited number of people. Yes, of course, you want to use your teammates for their core expertise. After all, that is why you brought them on board. But as we know, “Two heads are better than one!”, and asking for their feedback even outside of their immediate competency can give you the necessary outside perspective to make an optimal decision.
A Board of Advisors is another often underutilized startup resource that enables the founders to progress faster, access a greater network of contacts, and lend additional credibility to their venture. We address it further in this blog.
3. Failing to formulate a clear go-to-market strategy
Formulating a clear measurable go-to-market strategy for a company with no brand awareness, no product on the market, and no users is very hard. Fortunately, a robust financial model can effectively address this problem.
The process of creating thorough financials guides you towards refining your business plan to the point where all components of your business strategy, including your marketing strategy, can be expressed in precise quantitative terms and provide a logical measurable representation of your plan of action.
Do you want our latest content delivered straight to your mailbox? Sign up to our mailing list and, as a bonus, get a coupon to redeem for a FREE COPY of the Business Model Analysis Roadmap - Your step-by-step guide to creating CREDIBLE financial model assumptions.