Raising Capital as a First-Time Founder

Starting a new business is not easy. The process includes a whole lot of priorities and aspects that you need to focus on. 

A survey by the Kauffman Firm estimated that, on average, it takes at least a minimum of $80k to keep a startup running through its first year. Fundraising is a challenging task, and most companies fail at it. It’s even harder if you’re running solo. And the worst part of it all is that most fail to follow the necessary steps.

As such, we bring a step-by-step procedure on raising capital as a first-time founder and ensuring an efficient running establishment for a long time. Before we begin, let’s look at some of the most successful entrepreneurs who started with nothing but emerged as global leaders in their league.

Sophia Amoruso: The founder of Nasty Gal, a women’s fashion retailer, was diagnosed with ADHD at a tender age, which resulted in her withdrawal from school and forced her to work odd jobs to make ends meet. The major break for her was in 2006 when she started dealing in clothes and other items through an eBay account — Nasty Gal Vintage. From 2008 to 2011, her revenue increased from $223,000 to nearly $23 million.

Jack Ma: The co-founder and former executive chairman of Alibaba was initially rejected by 30 companies before his luck finally changed. In 1995, he managed to raise over $20,000 to build an online directory for Chinese businesses, and finally, in 1999, after returning to China, he created Alibaba.

Steve Jobs: Any list of famous entrepreneurs who started small and made it big is incomplete without a tribute to the genius Steve Jobs. Jobs got out of college because his family couldn’t afford his education. Eventually, he had an incredible career and formed the Apple Computer Company with his childhood friend and electronics expert Steve Wozniak. Jobs’ net worth was over $8.3 billion at the time of his death.

These entrepreneurs started from a humble beginning at first and worked their way hard to achieve fame and success. There’s no shortcut to success, but this brief guide is aimed to help you take that first plunge.

How/Where to raise capital from as a first-time founder?

There is a surfeit of sources available for the first-time founders to raise capital for their company.

  • Bank Loans: Banking and financial institutions are the best sources of raising capital and offer a slew of schemes and funding plans for startups.  
  • Initial Coin Offering: The cryptocurrency equivalent to an IPO. The coin offering process is the new trending form of raising capital. In 2017, companies from all across the world raised a staggering $5.6 billion through this process.
  • Angel Investors: An angel investor is an individual who has a sky-high net worth and offers funding to startups. According to a Stanford study, 90% of all early-stage capital comes from angels. Angels funded over 63,730 startups in 2019, with an average deal size of $374,225.
  • Family Offices: Family offices are private wealth management advisory firms that offer investors to startups.  
  • Venture Capital Firms: These are private equity firms involving investors who collaborate and offer capital to startups and new establishments.  
  • Equity Crowdfunding: A steep ahead of crowdfunding. In exchange for relatively small amounts of cash, public investors get a proportionate slice of equity in the business venture.

Various states, municipalities, and corporations also provide monetary support to startups. In addition to these, there are various facilities like Accelerators and Incubators that offer grants and guidance to help turn your idea into a successful startup.

Tips for raising capital as a first-time founder

“All our dreams can come true if we dare to pursue them.” – Walt Disney

To become a successful entrepreneur, you need to begin with courage, followed by hard work and strategic planning. Below are a few tips for first-time founders:

Prepare as a First-Timer 

It is crucial to prepare yourself as a first-timer because funding is nevertheless a mind game. You need to appropriately set your expectations, since this alone will help you determine the difference between success and failure. You need to start accepting rejection as a learning opportunity and not as a failure.

Look for Advisors, Not Only Money

Along with monetary investments, you’ll also need the best mentors — sound mentors who not only believe in you but also believe in your idea and business. You might also require co-partners to reach out to them through any means available to you — social media profiles, personal, or social connections. 

Understand Funding Platform Profile 

It is a must to find the perfect funding platform profile to make your startup a hit. Funding platforms like CircleUp, AngelList, Patreon, WeFunder, and Fundable give access to support ventures based on the idea’s quality.

Do the Calculations

It is essential to know your numbers backward and forward and identify the money you spend each month (cash-burn rate), what you owe in terms of debt and equity (capital structure), and your capitalization. Think wisely before signing off on a deal. Similarly, make sure you’re comfortable with the deal before accepting it. Keep the bigger picture in mind and decide what’s best in the long run. What may seem like a colossal expanse at the moment can prove to be invaluable in the distant future.

Streamline Capital Requirement

Once the calculations are ready, you need to understand your specific requirements and startup funding goals. It would help if you build relationships with as many people as possible because it’s impossible to conquer the world as a solo rider (founder). Start pitching or prepare components that support all claims of your company’s potential to produce significant returns.

Target Potential Investors

What is your idea of the dream team? Are the prospective investors a perfect match for you? You need to identify the qualities you are looking for in your investors and choose the ones that are most suited for your startup based on their market expertise and customer insights.

Create a Capital Raise Roadmap

We are at the final stage of raising funds for your startup. It would be best to create a strategic roadmap to put in front of your selected investment for raising capital. You will need to choose a person to become the co-founder or CEO to paint on the fundraising campaign.

Final Words

Before you begin the journey of fundraising, try to keep it as efficient and organized as possible. Get your facts and figures straight along with a strategic roadmap to attract investors to invest money with you. Good luck.

KiwiTech has helped hundreds of entrepreneurs connect with investors through its various pitch events including demo days, techathons and venture fairs. If you are actively raising capital and seeking opportunities to pitch to angel investors, VCs or family offices, find a KiwiTech event tailored for your startup stage!

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