When starting a new company or expanding your existing one, raising funds is often the key to success.
Venture Capitalists (VCs) are investors who put their money into early stage companies to provide them with seed capital and support during the growth phase.
They invest in promising businesses with high potential returns.
Venture capitalists look at both the short term and long term potential of startups.
The goal of venture capitalists is to build strong brands, increase revenues, expand markets, and create innovative technologies.
Prepare your SaaS for Funding:
Raising money for a startup can be quite cumbersome and daunting.
Getting funding from venture capitalists is not easy. That is why you must prepare and position your SaaS startup for funding.
1. Determine your target funders
2. Prepare your documentation
3. Think about the amount of capital you need
4. Be specific on how the capital will help your SaaS grow.
There are several things that you should consider before applying for VC funding:
First, you’ll want to determine whether you want to raise debt or equity.
Debt financing usually comes at higher interest rates, but offers less flexibility in terms of how much money you can borrow.
Equity financing, however, gives you more control over how much money you receive.
Second, you’ll need to decide whether you want to apply for seed or Series A funding.
Seed funding typically involves smaller amounts of capital compared to Series A rounds.
Third, you’ll also want to examine the amount of funding you would like to receive. If you’re looking for $1 million dollars, you’ll probably need to put together a proposal that shows why you deserve that kind of investment.
Finally, you will need to look into the type of investor you would like to approach.
There are several ways to approach raising capital for your startup:
One of the biggest challenges that entrepreneurs face is raising money.
While some companies choose to self-fund their businesses and build their company organically, there are times when they need outside investment.
This can be done through crowdfunding, venture capitalists, bootstrapping, angel investors, and Series A, B and C funding.
Crowdfunding is a great way to start a business because it allows entrepreneurs to reach out directly to potential customers who might otherwise never hear about them.
Crowdfunding is a method where potential investors (called ‘crowd‘) pitch their ideas or projects to funders (usually called ‘investors‘).
The idea behind crowdfunding is to bring together both crowd and investor, thus creating new opportunities for capital formation.
Crowdfunding is becoming a common way for startups to raise funds.
Entrepreneurs who choose this option get access to additional capital from a large number of individuals at lower costs. This makes it easier for them to launch their businesses.
If done correctly, it also creates a sense of community between backers and creators.
There are two main types of crowd funders – those who raise capital for themselves, called micro-investors, and those who seek investment for someone else, known as angel investors.
2. Venture Capital
Venture capital is a type of equity financing where private investors provide capital to start or expand businesses.
Venture capitalists invest in early-stage companies that they believe have potential to become successful.
They usually take a stake in these firms, allowing them to reap rewards if their investments succeed.
(1) VC funding helps startups get off the ground.
It gives entrepreneurs access to capital at a time when they might otherwise lack resources.
This allows them to build strong teams and develop innovative ideas.
(2) VC funding also creates jobs.
When new companies receive funding, they hire employees who create additional value for customers and the broader economy.
(3) VC funding provides liquidity.
Investors expect some return on their investment, and thus VC funds typically require founders to pay back a portion of their company’s profits.
If a startup goes public, its shares can then be sold to raise cash for future growth.
To Bootstrap a new venture, entrepreneurs typically rely on their personal savings and credit cards.
They also try to get some early customers before they ask investors to fund them.
Bootstrapping takes time since it involves investing resources into something that has no guarantee of success. Nevertheless, it helps entrepreneurs gain valuable experience.
5 ways for successful bootstrapping:
- Start with MVP (Minimum viable product)
- Outsource development
- Choose the right technology stack
- Study and adopt lean software development practices
There are many benefits of bootstrapping:
First, it helps entrepreneurs save time and resources by avoiding the costly initial investment required to start their companies.
Second, it allows them to focus only on growing their business instead of worrying about hiring employees, paying taxes, etc.
Thirdly, they get to retain ownership over their businesses.
Lastly, bootstrapping enables entrepreneurs to build strong relationships with customers and suppliers.
In addition to saving time and money, it also provides entrepreneurs with the opportunity to develop long-term relationships with clients and partners.
This means that they can offer better services and provide better customer support.
4. Series A, B, and C funding
Series A funding:
Series A funding is the most common form of startup financing.
It is often considered the first step towards building a successful company.
These funds are provided by venture capitalists who invest in young companies hoping to become profitable businesses.
If you want to raise Series A funding, you should create a pitch deck.
In other words, you need to present your startup to potential investors.
Make sure your pitch is concise and tells them why you are worth investing in.
Also, make sure you include information about your team, vision, company growth plans, etc.
Series B funding:
Series B fundraising enables entrepreneurs to raise additional funds beyond their seed round.
The main reason companies raise Series B rounds is because they want to expand their operations, hire new employees and launch new products.
Of course, raising additional funds helps them reach these goals faster.
Series C funding:
Series C funding is a great way to get additional resources without diluting ownership.
A startup company raising its Series C funding has a strong growth trajectory, high valuation, and proven management team.
These characteristics indicate that investors are confident about the future prospects of the company.
5. Launch a lifetime deal to raise funds:
To raise funds, launching a lifetime deal is necessary.
The term ‘lifetime deal‘ is often used to describe a fundraising event where investors pay a fee in exchange for exclusive access to a company.
This type of investment usually comes at a premium price because the investors expect a significant return over time.
This fundraising strategy allows businesses or non-profit organisations to take advantage of large amounts of funding from individuals who want to support them.
A successful investment from a VC firm has the potential to double, triple or even quadruple your company’s value within a short period of time.
To gain traction, in today’s crowded marketplace, you must have access to capital.
If you’re a startup company, your choices are limited. However, some of these are flexible like angel investors or launching a lifetime deal.