When you’re involved in a startup, there are many things you need to keep in mind. Securing funding for your business is only one thing you need to do. There are a variety of ways that early-stage companies can finance their startup, but how do you prepare for seed funding? We take a look at the steps startups need to consider below.
Have everything in place
If you don’t have a thorough business plan, a solid financial report outlining your current situation, and a detailed financial outlook, you need a trusted CFO or accountant to get those completed before you start your funding rounds.
Take care to ensure you know all about any legal issues regarding secure funding, business licensing, and everything else a potential investor could inquire about. You’ll want to have a solid plan for hiring employees and a plan on how your business will be run.
Remember, without a track record in place, your investors will be looking at your only projections before they make a decision about investing.
Learn how equity is divided
When you ask investors to take a chance on your startup, you must be prepared to hand over some equity in return. Have an idea well in advance of what type of ownership you’re willing to give away — and for how much. Remember: you need to keep a minimum of 51% of your business to maintain control. And if you have business partners, you should have the numbers worked out around how much equity you each want to keep and how much you’ll offer to investors.
If you’re a smaller business, you may only be able to get funding from one Angel Investor who’s likely to get a fairly good chunk of equity in your business. This will translate into them getting a significant say in how your business is run.
When you secure a few smaller investors to offer seed funding for your business, equity is then spread out — giving these investors less sway in your business. There are pros and cons to having different kinds of funding, and you need to work closely with your CFO to weigh your options.
Network
Maybe this isn’t your first startup, or you’ve worked in business for a while, so you may not have to look far to find investors. But if you’re relatively new to all of this, you need to be prepared to network to find other entrepreneurs and investors who will be willing to work with you and help your startup succeed.
Utilize your social media
You want to get people excited about your business — both potential customers as well as investors. Getting your name out there and networking online is extremely important. Often, even if you meet an investor in person, they’ll likely check to make sure you have a strong social media presence.
Have a solid financial expert on your side
Hiring a virtual controller from somewhere like Virtual CFO will ensure your startup gets off to the best start possible. We’ll put together your entire financial outlook and help you secure the financing and investors you need during your startup’s funding stages. Contact us today for more information — and ask about our part-time or fractional CFO services.
