This column is authored by Kalpana Arya, Content Expert with Techpillar
Raising money for your startup business can be a tedious task. From developing a minimum viable product to refining your pitch, you need to try different strategies and give your best shot during the gruelling ‘Shark Tank’ session.
As a startup entrepreneur, you may find early seed investors enjoying all the leverage during investment-related meetings. It’s a discouraging situation when they ask for a large equity stake in return for a small capital investment in your company. But to achieve success in capital scaling, you can’t afford to lose heart. You can bring investors on your side by addressing one of their major anxieties: Risk factor in the business.
Here’re the ways in which you can mitigate the startup risk and increase the chances of rewards from investors.
Build a Great Team
If you have a great business idea, you need an equally great team with the ability to execute on it. Investors look for the founding team of a startup to gauge its business strength. So, be careful while picking up candidates for your founding team. A team that is enthusiastically ready to commercialize your idea can remove a few layers of risk and have a positive impression on investors.
Get Ready with a Tested MVP
If a startup entrepreneur comes up with a minimum viable product (which has enough features to please early customers), then there are higher chances of investors spending on its commercialization. A tested MVP speaks volumes about your readiness to take on the market. On the contrary, a startup that is still struggling to get the additional wings of technology for its product to take off is likely to give a lackluster performance in front of investors. Invest in the tools of the trade like CRM software at the very beginning, so that your founding team doesn’t have to struggle while commercializing the business idea.
Create Barriers to Competitors’ Entry
If the barriers to the entry of competitors in your product domain are low, investors are likely to pull their hands back. One of the best ways to de-risk your startup by keeping competitors away is to patent your unique product or proprietary technology. If you put legal barriers to the entry of competitors in your market, investors will also gain confidence to invest in your idea.
Get Free of Encumbrances
Your business can be less risky if it’s free of encumbrances of all sorts. Be it talent shortage or technology insufficiency, investors are going to be dissuaded by such hurdles to your business success. Also, ensure that no existing patent is likely to affect your business prospects in the near future. Else, investors will not think much before jumping off your startup ship.
Stay Abreast of Laws
If your product has the potential of being regulated in the future, then the risk factor increases for your business. So, stay abreast of any legal restriction that may affect your growth. As a result, you will be more confident to convince investors about the feasibility of your idea.
Stick to your Strengths
Recognize what is your strength, and stick with it. When you are venturing into a business with a tight budget, it is likely that you frequently shift roles between a manager, marketer, bookkeeper, web developer, and HR. But, this can lead to a problem in the long run with nothing extraordinary being done at any front. So, it’s wise that you stick to your strength and acquire talented resources for other significant tasks.
Offload Risks onto Insurers
The best business policy to de-risk your startup is offloading the risk onto insurers. One insurance that your business needs right away is general liability insurance. This insurance will keep you protected against any type of lawsuit over product failure, employee conduct or any other issue that may evolve during the course of business.
Create Interest in your Startup
Businesses often focus completely on developing a product or service. But, people will not come to your brand just because you have developed something remarkable. Until people know about your brand and its deliverables, your efforts in creating something invaluable will go unnoticed. One of the best ways to spread positive words about your brand is being active on social media and sharing informative posts. Not just buyers but even investors will come to your brand when they look up to you as an expert.
Making it to the negotiation table is already a challenging task. So, if you get a chance to be there, make sure you come out with the hands full.