The other day I wrote about 12 funding sources for the start-up. This article is linked to that but focused on making a winning funding strategy for your startup. Sourcing the funding is part of the broad funding strategy especially for your sustainable startup business.
It is important to understand the definition of strategy. If you google the word strategy you will find tons of definition.
To simply put, you need funding to give life to your long-cherished startup. A well-formulated funding strategy could ensure better clarity of the path to move on.
It always gives strong clues when you start crafting your strategy by asking questions. You should start asking what the bare minimum amount you need to inject into the startup, how would you achieve that and by when.
As soon as you have the answers to the questions what, how and when with alternate options, you have a got a solid foundation to start crafting your startup funding strategy.
Sounds simple, but you have to know that according to Forbes, 90% of startups fail during the first year of initiation. Many of them fail due to short of continued funding.
Better to watch out and realise how you would join the tiny rest 10%. The first and most solid step to crawling towards winning 10% is to give blood to your startup in the form of arranging continuous funding.
A well-framed effective funding strategy for the sustainable startup business in this regard will surely give you an overall direction and help you do proper planning on how to arrange the required funding.
I have seen many entrepreneurs do the mistake of focusing too much into product or service development without having a solid funding strategy.
As a result, by the time they become ready with a perfect product or service, it becomes too late or too much time consuming to reach out for the required fund.
1. Do the business model canvas as the first step for funding strategy
Business model canvas is a fairly good model to start with. It is a visual tool that will force you to finalise your business model.
Though I see a major drawback of this model which is the absence of competition analysis. I believe if you add this you will have the solid basis of crafting your entire business model.
Do brainstorming together with your team and agree upon the model. Certainly, a clear picture of the business is important for yourself and your team to remain on the same page and put effort towards agreed directions.
I have created an online course at Skillshare on Business Model Canvas. Please check it for 2 months of free premium membership. You will get to know how best you could prepare your business model.
2. Have the business plan ready
Once the business model canvas is prepared including the competition analysis, the next important step of the funding strategy is to prepare your detail business plan.
The business plan must contain a month-wise plan for one year. And it has to have at least 3 and 5 years of precise and top-line plan respectively.
This standard business plan document will help you and your team to have a clear view of the business.
In addition, it must be a live document which has to review on a regular basis.
3. Determine funding requirements
Your well-crafted business plan will lead you to decide what kind of funding is required together with the amount of funding and timeline.
As a result, you can prioritise based on the short term, mid-term and long- term needs of your startup business. But the focus of funding should start from short term requirement.
4. Define the time frame in the funding strategy
Define the time frame according to your need. But I believe, the first focus should be arranging the short-term funding which should not be less than a year.
Midterm should be somewhere between 2 to 3 years. This period should be treated as the development stage of your startup business. Beyond 5 years should be considered as the long term where you need funding for supporting the growth of the business.
For sure you will be tempted to reach the growth stage within a year which is fantastic. But the strategy should not hold on to your emotion.
5. Have clear milestones ahead
Set the target timeline as your collective key performance indicator for the entire team. This has to be divided based on SMART (specific, measurable, achievable and time-bound milestones.
In other words, short term financing should be divided into several small achievable milestones. The achievable perception of any target eventually disseminates more energy internally to achieve that.
6. Have dedicated resources to accomplish the milestones
Whatever the team size is, if it is at least more than one, there must be a dedicated person whose primary role will be to lead and successfully implement the funding strategy. He/she should hold the responsibility of being the custodian of the agreed funding strategy.
If you are both co-founders of the company, at least one has to drive this agenda. In the best case, if you hire the 3rd member in your team, try to get the one whose main responsibility will be to drive the funding strategy.
7. Have a funding “COACH”
Imagine a football team. No matter how talented the team is, still to win the game it needs a coach to support along the way. Similarly, your startup needs a relevant individual who will coach you to reach your goal according to your funding strategy.
You must be wondering how come your early-stage startup will hire a funding coach! That is indeed a challenge, but if you truly understand the impact and importance of having a coach, you will figure out how to solve this.
One simple way is to search on LinkedIn. Do some search of people in your domain on LinkedIn. You will see a lot of them have options to be a pro-bono advisor. Reach out to them and ask politely. It is unlikely that they will refuse.
Even if they do, reach out to me & book for a free 50 minutes session.
I have written an article highlighting the importance of having a funding coach. Read it here why do you need a funding coach.
8. Prepare a funding map as part of the funding strategy
Together with the coach, make a proper funding map considering number 1 to 6 mentioned above.
Make it as much fancy, visually sexy & as much inspiring as possible. It has to be a large visual template, which could be treated as the means of your merchandising as well.
That is to say, you also have to consider, when you look at it, you should feel inspired, recharged and the sense of urgency.
I am working on preparing the funding mapping template. As soon as it is ready to publish, I can inform you. Please register below so that you will get informed.
9. Prepare the startup pitch
Up to this part of your funding strategy for the startup, you know what you need. Now it is time to prepare a clear, precise, impact creating startup pitch.
It is always handy to have different versions of the pitch keeping the basic same. Do not worry, I did not mean, several startup pitches.
What is important is to prepare both shorter (elevator) pitch, medium and longer pitch in the form of written texts in pdf and PowerPoint presentation.
Importantly make sure each of the team members is all expert in giving the elevator pitch as if they are telling their own names.
10. Look at the sources of funds
There are several sources of funds that you have to prioritise according to your startup needs. You could have different options to explore further for example grant, loan, challenge fund etc.
Find a dedicated article on this which I wrote before.
11. Prepare the database of the fund networks on-line and offline
Make an exhaustive database of the probable source of startup funds. Most importantly, keep it in a live database and accessible to the team members.
So that whenever, whoever come across any sources, that can instantly be saved in the database. Accordingly, the database remains comprehensive and updated.
12. Sort out the database according to the requirement
Once the initial database is prepared, then together with the team you need to sort & organise the database. Importantly, sort it in a way that you could do some priority based on the requirement and characteristics of the fund providers.
You have to consider that your funding requirements and funders characteristics have to be matched.
Once you sort the database then target the immediate win. You have to have a detailed understanding of the point of interest of the individual fund source and prepare the pitch accordingly.
Consequently, shortlist at least 5 probable fund providers and get prepare to win them with the right pitch.
13. Have a Gantt Chart of 6 months funding strategy effort
Many suggest that winning a single early-stage investor is good enough. In fact, many founders tend to get settled on as soon as they get the first break.
Very importantly I suggest to always go for winning more than one funders or investors.
This eliminates your risk of future funding requirement and simultaneously it reduces the risk of the fund providers as well.
So, prepare a Gantt chart with specific time frame targeting the top sorted out fund provider.
14. Finalize the KPI of the funding strategy
I believe during the early stage of the venture, each individual of the team should have specific responsibility and KPI of sourcing a certain amount of funding. The cumulation of which will full fill the short-term funding requirement.
On the other hand, this will also create more buy-in of each of the team members in the venture. By KPI, I refer to key performance indicator.
In other words, even if you have a dedicated resource for the funding strategy, at least for the short term period, it has to be put as a responsibility with all the team members.
The weight might vary depending on whether you have the dedicated individual or not however it is important for others to have the KPI.
15. Have this Funding Strategy printed
Make the whole funding strategy for the startup, up to point number 14, as a printed document. In addition, make this funding strategy available to each of the partners and team members.
Once the funding strategy for the startup document is published and made available, all the team members should be given a week time to go through it in detail.
Afterwards, a common meeting to be fixed for clarification and adaptation. The outcome of such a session is to agree on the Funding strategy collectively.
16. Follow up, review and adjust the funding strategy
The funding strategy document should not be a static document. It must be a live document which must be adaptable depending on the situation and internal agreement of the team.
Subsequently, as a team, it has to be agreed that how frequently and in what interval this funding strategy will be reviewed and updated.
In conclusion, I can bet, if you follow the ways elaborated above in order to prepare your funding strategy for the sustainable startup business, you will definitely achieve your funding goal before the time.
Challenge me if you would like. Feel free to book a free appointment to discuss further by clicking here.
