Fundraising is arguably the most important issue for any entrepreneur. Without financial backing, even the most brilliant idea will never see the light of day. This is a daily fight for startups as they delicately balance cultivating their billion dollar ideas while struggling to come up with the next hundred dollars to keep the lights on, stresses Asif Khan, a successful entrepreneur who founded Caremerge in 2012. The reason this is so difficult is because wooing investors is an art and not a science, adds Khan, who recently received multi-million dollars in funding.
Caremerge is a healthcare technology company and a member of the GE Health Growth Accelerator Program. Caremerge’s technology and first-of-its-kind apps have transformed senior healthcare providing coordination in patient care between institutions, patients and their families.
Khan has identified the following seven tips that are proven to work when looking for funding:
- Take the Plunge. Investors will not give you a dime if they don’t feel you’re 100% focused on your new venture. That is, unless you’re a serial entrepreneur who has started and sold companies in the past.
- Show Capital Efficiency. Demonstrate that you have been able to get a great deal done with minimal to no money. In other words, you have done wonders while “bootstrapping.” Getting some revenue from at least three clients (proving that there’s value to what you’re doing) would be fantastic, but other types of traction and validation would help too.
- Enter Competitions and Incubators. Things like winning startup competitions, getting selected to a startup incubator, partnering with a large company, are all good ways to show traction and some proof that you’re creating value. Good examples include: Ycombinator, Techstars, DreamIt Ventures and Startup Health.
- Solve a Real World Problem. Social networking is so last year. While said in jest, there is some level of truth to the idea that the next big thing may have not been conceived yet. The best place to start is to figure out a big real world problem. Nothing gets an investor to open their check book like identifying a big problem and offering a clear solution.
- Moonshot. If you have spent time in a given industry, you have likely realized its complexity and therefore noticed that one simple solution will not fix everything. The term “moonshot” means that if you need to make something 10 times better then you have to start from scratch. Visionary investors love this stuff because it’s all blue ocean ahead which means minimal to no competition. The ability to create a new niche segment within an industry is very attractive to investors.
- Go B2B…2C. One the one hand, everyone loves a good consumer product but even amazing products fail because it’s so difficult to get people’s attention. On the other hand, businesses have challenges they face on a regular basis due to changing industry needs and other regulations. Most importantly, they have funds and large budgets to fix those problems. Focus on solving those problems and then it’s gravy if you can spin the business model to get their end customers involved.
- Use Crowdfunding. Sites like Kickstarter.com and the rise of technology have created new ways to raise capital. This is a particularly effective method for consumer products as the chances are higher that some people out there may want a certain product.