How to get funding for your idea is a question which leaves many dumbfounded. In this article i try to explain what you as an entrepreneur must do before you try to raise funds for your idea.
By idea i mean that you have either a prototype or a working product. Having just an idea will get you no where as explained later in the article.
Think of a worthy idea
Before you try to raise money for your idea make sure it is worthy. The idea can come from anywhere. It can be a new and unique idea, or improving an existing one.
However there have been cases where the most useless of ideas have been funded and I believe that is just a waste of energy and money.
Do Your Home Work
Before starting work on your idea you must first define a user persona which explains who your ideal user or customer is, what his personality is, what his income is, what inspires him.
Build Your User Persona
The user persona helps you to understand your ideal user and it will make it easy for you to build your idea and target to the correct market.
You must then use your user persona to find a problem in your market and pitch your idea to them. If your idea solves a pain point for your market and if they accept it and are willing to either use or pay for it then you are on the right track. If you find something lacking then you will have to pivot and include what is missing, and get rid of what is not important.
Build Your Business & Marketing Plan
Always have your numbers ready. An investor always prefers an idea which already is already being executed and has paying customers and sales.
A business plan also contains your current costs, expected costs, revenue, expected revenue, etc…
A marketing plan helps you chart out how you will conduct your marketing efforts. Having a business and a marketing plan explains what you plan to do, and also helps understand your business goals.
Execution is Extremely Important
An idea which has not been executed has no value. Unless you have done some form of work on the idea, no one will fund your idea. Executing an idea shows to the potential investors that you are willing to work on your idea.
Even if you have not yet executed on your idea, but have done your initial homework even then you might get funding for your idea.
Getting funding for your idea
Source for image: http://techzulu.com/wp-content/uploads/2013/05/vc-funding-now-what.jpg
Where can I get funding from?
There are a number of different sources which you can get funding from.
Borrow from your family and friends
This is the first place where you should go. There is a high chance they will give you the money for being family but you have to prove them your idea’s worth. Also you might not have to give any equity since you are borrowing money.
Look for Angel investors
Before you can apply to venture capitals and have already exhausted your family and friends for funding, try to find an angel investor. They will either give a convertible loan or ask for equity. Angel investors invest their own money into these startups and as a safeguard also want a high return on investment as there are very chances that the startup will fail.
Try To Get Venture Capitalists on Board
Venture capitalists like the Angel investor invest money for equity. Before investing into a company a venture capitalist will have due diligence done and may not invest in your idea if they do not seem it to be a viable investment.
Bootstrap your way
If you can afford it it is better to pay from your own savings, then you do not have to share ownership with anyone. You can either spend from your savings or from your monthly paycheck if you have day job. You can also take on consulting work while you work on your idea. The money that you earn through the work can also be used to pay for your idea.
A new phenomenon which has taken the world by storm is the crowd funding platform such as kickstarter, and indigogo, where you can post the details of your project and your pitch and have others fund your project for no equity. If your project reaches the target then you will get the target. However, since there is no equity involved you have to provide the backers with something in return.
Conclusion & Disclaimer
There is no guarantee that your product will be funded even if you have done all of your home work and have a product. If the investor finds the investment to be a good one then he will do so, and also how you pitch to the investor will also matter. Even if you have the world’s best product but you get your pitch wrong no one will invest in your idea.
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