Investment is one of the most important decisions that founders make. There are so many startup pitches, so many ideas, so many “how to” guides and so many investment opportunities. If you want to gain investment in your startup, it is important to know the right time to invest.
A successful startup is one that does well in the market and makes money. For a startup to be successful, it needs to make money for its investors. For startups, raising money is like selling stock in your company.
When you raise money for your startup, you are selling your ownership of the company (the “stock”) to other people (your investors). When you raise money, you are taking on more risk because you are giving up control of your company.
So how do you know if your startup is ready for investment? The answer depends on what stage of your startup’s development it is at and how much money you want to raise. The steps in this article can help point out whether your startup is ready for investment or if it should be delayed until it is ready for investment.
Do Your Homework
First off, do some research on companies that have raised significant amounts of money before. Go online and look at their websites or watch videos of their pitches/investment presentations on YouTube or similar sites. You will learn a lot about what makes a good pitch presentation by watching these presentations.
You will also learn a lot about the personalities of the founders. You will see how they act in front of investors and whether they are authentic. There are many types of investors, so you need to find out which type of investor is best for your startup. Some investors like startups that are already profitable, while others prefer startups that have less than $1 million in revenue.
Understand Your Startup’s Market
It is important to understand your startup’s market before you raise money. It is important to know who you are selling your product/service to and why they would want it.
It is also important to know if your startup can compete with similar companies that already exist in the market or if it has something unique that no other company has that would make it stand out from competitors.
It is important to understand whether your product/service has the potential to be profitable and how much money you think it will make for investors.
Figure Out How Much Money You Need
There are a lot of ways to figure out how much money you need to raise, but the most common is to determine how much money you need to get your startup off the ground and then add money for growth (expansion).
A good rule of thumb is that you should have at least 20% of your company’s revenues in cash reserves at all times. If you do not have enough money to run your company for a year, then you should not be raising money.
You can figure out how much money you need by looking at the projected revenues of your startup and how much money you have raised so far.
Set Up A Pre-Investment Meeting
A pre-investment meeting is a meeting between potential investors and founders before an investment has been made, or before any commitments have been made.
The purpose of this meeting is to build rapport between investors and founders, get information about each other, learn about each other’s backgrounds, make sure everyone understands what each other expects from the relationship, discuss the terms of the investment, and make sure everyone is on the same page.
This meeting is important because it can save a lot of time and money in the long run. If you meet with an investor at the same time that you are pitching them for money, then you will not be able to give them a good pitch because they will have already made up their mind about whether they want to invest in your startup.
You will also not be able to get all the information that you need from them before they make a decision. The pre-investment meeting is a good way to find out if there are any red flags with the investor before making any commitments.
If you do not have any connections with investors, then it is important to make some connections beforehand so that you can learn more about them and get information about what they are looking for in startups.
You can ask your friends, family members, or other investors who have made investments in startups if they know any investors who might be interested in investing in your startup.
The steps in this article can help you figure out if your startup is ready for investment. It is important to know when you should not invest in a startup and when you should not raise money for a startup.
By doing your homework, understanding your market, and setting up a pre-investment meeting, you will be able to make the right decision on whether to raise money for your startup.
About the Author
I hope that my post has helped you know more about Startups. Feel free to leave a comment and tag me and I will answer them. Follow my profile (alexanderlhk.medium.com) to get the latest content I post to stay ahead of the curve.
I am the Founder of Cudy Technologies (www.cudy.co), a full-stack EdTech startup helping teachers and students learn better. I am also a mentor and angel investor in other Startups of my other interests (Proptech, Fintech, HRtech, Ride-hailing, C2C marketplaces, and SaaS). You can also find me on Cudy for early-stage Startup Founder mentorship and advice.
Connect with me on LinkedIn (https://www.linkedin.com/in/alexanderlhk) if you have further questions. Let me know that you are a reader of my Medium posts in your invitation message.