Startup Advice

Why Building Business is the best way to raise funds from VCs and Angel Investors

startup-funding

Most analysts claim that building business is the best way to raise funds from VCs & Angel Investors

This special article has been written keeping in mind all the young startup founders as well as those budding entrepreneurs who are about to start their startups. As is well known, these breed of entrepreneurs are always in desperate search for capital.        

There is no disputing the fact that ‘capital’ remains the most essential component for starting and operating virtually any business. Anyone trying to dispute this fact even scarcely can be either termed as too ‘naïve’ or someone who is simply not fit to be an entrepreneur. Not surprisingly, capital’s overbearing importance literally takes precedence over almost everything when an upcoming entrepreneur thinks of starting a new business.

Hence today most entrepreneurs find themselves blindly chasing investors in a desperate hope to secure capital for their business. However, this blind chase sooner or later becomes a self-defeated quest and most entrepreneurs invariably find themselves hitting into a wall.

The young entrepreneurs carried away by the glorifying stories about fundraising at some stage realize about the futility of the entire exercise. But this self-realization seeks in only after bearing the brunt of a huge price. The price obviously being the massive amount of time and effort that founders and entrepreneurs invest in this entire exercise. Something that is never going to comeback.

Worse, in some scenario, all these time and energy spent in this unrealistic pursuit ends up weakening the already fragile startup and leads to complete shutdown.

But what if these time and efforts were invested in something more productive?

Nothing can be more productive than building the foundation of your business. Most analysts agree that if most founders are concerned with this fundamental thing then funding will take care of itself. In fact, if founders are able to build a strong foundation then it will be investors who will be doing all the chasing while they can simply lounge on their couch.

Although this may sound too good to be true, it is a proven fact that founders with businesses that boosts sizeable customer tractions and market share manage to garner strong interests from investors.

To cut it short, rather than being obsessively concerned about raising funds founders need to concentrate all their time and energy in building their businesses. After all, it makes absolute sense to chase paying customers than investors, who are probably least interested in your business proposal.

 

Never underestimate the power of Bootstrapping

Bootstrapping_startup

Bootstrapping a startup is difficult but not impossible

Media’s never-ending romance with fundraising stories has completely diluted the importance of bootstrapping a startup. However, Media’s one-sided affair can never dilute the fact that today many of the successful startups were once bootstrapped startups. This includes some of the big names like Flipkart, Freshworks and Oyo Rooms.

Founders of these and many other successful startups were once operating their businesses from non-descript and small rental apartments. Their businesses were literally eking out an existence as their founders kept working hard to build strong foundation for their companies.

Today the results of their hard work speak volumes as their companies stand at the very pinnacle of success. Their hard work is what helped their companies to get noticed by high profile investors, who were clearly impressed by strong financial metrics and market tractions that these companies boosted.

But is it really easy to bootstrap a startup? Well, if founders have very scarce capital in hand then it is indeed going to be very challenging, but is certainly not an impossible task to achieve. If the concerned founders choose to play by rulebooks then they would not be facing any major problems. In fact, these rules will help the company in keeping the startup on a strong financial footing even if it takes unduly long time to raise funds.

Following are some of the cardinal rules that all the founders of bootstrapped startup need to follow:

  • Be frugal, even when it comes to taking your own salary
  • Take only calculated risks; taking risk without proper due diligence is simply too risky
  • Getting anywhere near bad debt trap is the end-game of the business
  • Be the marketing wizard of your own company

 

Conclusion: Well, it is true that several founders are lucky enough to secure seed-funding only on the strength of their business idea. But in all probability, not everyone boost the same networking clout that can help them land easy funding. The only sensible way to go by is to work hard enough to build strong business to garner interest from investors. As is well known, there is no shortcut to success and this is more so true for entrepreneurs.

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