Investors · Fundraising

How to secure funding for startup?

Navneet (Ricky) Advisor at Totally Square Records

January 23rd, 2016

If you're an investor advising me here, please do ping me separately if you are interested in hearing my pitch.

All my career, I have been coming up with ideas with no funding to test it. I am not taking a credit for it, but I had Groupon idea few years before they came out. Groupon's founders did good and I am happy for them. I had more ideas similar to this which i kept passing because I wasn't passionate about them.

Since late 2014 I have been sitting on the idea that would simplify and standardizing the flow of financial information for the investor community. This product would improve planning and analysis for both startups and VC community. Imagine answers to your financial questions on tip of your finger. Simply priceless!!

I am passionate about this idea and the market is there. This product will be utilize by pre- and post-funded startups and investors.

How do I raise money for my startup before creating the product and securing 1st customer? Specially, when this is my 1st startup.

Lane Campbell I baked a unicorn cake once.

January 23rd, 2016

If your idea is that strong but you don't have the network of investors to solicit then forget raising money.  It's a waste of time to do that without a prototype or MVP of some kind.  Instead of soliciting investment I'd recommend you go out and network to recruit a co-founder who can build the product. If the idea can stand on it's own then it should attract other great people around it.  Once it's built you can try and raise money, or even better, you can just sell it and keep ownership in your pocket.  

Steve Owens Startup Expert

January 24th, 2016

Navneet, many people have great ideas.  There is no scarcity of ideas.  What is in short supply is the ability to execute on these ideas.  There are very few people in the world that can take an idea and turn it into a business.

Martin Omansky Independent Venture Capital & Private Equity Professional

January 24th, 2016

I represent 4 groups of angel investors. We do many start-ups. Here are some observations: (1) many investors and many more ideas - therefore odds are not in your favor; (2) our groups are biased in favor of projects that cannot be easily reverse engineered; (3) best start-up advice: find one credit-worthy individual who trusts you and has a good grasp of your technology and/or industry. Assemble a small kitty - say $25K - and purchase legal and accounting services; (3) find an adviser who can help you devise a cogent business plan; (4) use the document to solicit equity contributions from people you know or can easily network with. General comment: there is a great deal of content and detail necessary - in terms of law, taxes, competition, strategy, fiduciary duty, etc. related to start-ups. This activity is not for the poor or the faint-hearted. Be aware that starting up a tech company is a profound intellectual challenge. I suggest you find an experienced mentor, pay him/her, and pay attention. Sent from my iPhone

Mike Langford CEO - finservMarketing

January 28th, 2016

This question of "How do I raise money for my startup when it's still just at the idea stage?" is a very common one here on FD and other startup forums.

Most professional investors don't invest in ideas. It's simply too risky and there are too many great opportunities available where entrepreneurs have pushed through the lack of funding obstacle to get to the MVP stage of their business.

You may be able to raise a little bit of friends and family money at the idea stage but you'll struggle when approaching angels and VCs.

As for your idea. It sounds like you are describing a solution similar to AngelSpan or Visible. There are certainly many other startups in the space trying to solve the problem as well.

Does that mean that you shouldn't pursue your idea? No. Maybe these solutions are ripe for disruption and your idea is better. But it still comes down to execution. Ideas are a dime a dozen.

Quick Recommendation: I would avoid claiming that you "had the idea for Groupon" as some way of demonstrating how awesome your new idea is. It comes across like a drunk guy at a bar telling everyone that he had the idea for Satellite Radio. The logic thought the investor has is "If you are so smart and clairvoyant about the future why didn't you execute? I want to invest in entrepreneur who know how to make things happen not just guys who talk about their ideas."  

Gabor Nagy Founder / Chief architect at Skyline Robotics

January 23rd, 2016

Today's investors essentially won't fund you until you don't need funding. They'll consider investing in your company once you have a product, clients and revenue.
At which point, you don't need and should not want funding...

I wrote an article about this:

Ema Chuku Product Developer. Founder.

January 23rd, 2016

This is 2016, not 2011. You have a better chance at seeing a hen grow a teeth than seeing an investor give money to a startup with no MVP.... Find a way to develop an MVP and go live.

In between, could it be because you are so focused on investment funding with no product be the reason why you have so many undeveloped ideas?

Faisal Memon iOS Department Technical Lead at Citrix ShareFile Quick Edit

January 24th, 2016

I'd like to make a remark on your presentation on the problem, but I hope you're not offended because I do so with a constructive intention.

Your presentation of the problem references "I" not "we".  Its collaboration that is key to getting something off the ground because everyone in regular employment will have an extra amount of labour and some small money available to progress a speculative venture before income is available from it.

Also, by bringing in others, you are testing your basic entrepreneurial skills -- creating and sharing a vision and getting people bought into it.  You should be able to raise 20k USD by yourself from friends and family easily.

Sharing is also a sanity check.  Defending your idea enhances your understanding of the problem space, and is good grounding for when you face professional investors.

It's emotionally easy to go for investors first, not family because if it fails, there is no blowback to your inner circle.  However, that would happen anyway as your focus on the business will mean less time and attention to friends/family.

My last point is it appears there is a contradiction in your presentation of the problem because if you knew the VC problem space dynamic, you'd also know about how to raise initial money.  Since you're asking after that, it can't be that you understand the problem space.  I don't mean that to be a harsh statement, but doesn't it follow logically?

Once you had you 20k USD from friends/family, you'd seek a co-working relationship with a cofounder to build a MVP, then talk to other entrepreneurs to ask for a recommendation from their angel investor for an introduction to their angel or others.  That initial seed series money would also come with the angel's contacts in the VC industry where you could position for some Series A money.

I get the sense you do have good ideas, and I hope that your  directing them properly will result in good success for you.  Please report back on how you get on!

Dimitry Rotstein Founder at Miranor

January 24th, 2016

A lot of good advice here already, I'll just add a few points:

1. Friends and family (and fools), aka FFF, is a valid source of funding, but not a very good one, unless you don't care much about your relationship with these people, which will suffer once you fail (and you will).

2. Accelerators are a very good direction (probably the only way to get funded in your situation), but they rarely accept sole founders. In fact, many will automatically reject your application, if you don't have a co-founder.

So, the only way to go here (as far as I can tell) is to find a CTO co-founder, and apply to accelerators. Although, many accelerators these days don't give you any money, and in the ones that do the competition is fierce, but it's still the best path.

Oh, just one more thing. You will need a completely new idea as well. I don't know the details of your idea, of course, but whatever it is the chances that investors need your product are slim, and if they do then they already have it. But don't let this stop you - there is an unlimited amount of ideas out there. Hey, I had an idea for Netflix, Tesla, and SpaceX when I was 10 years old. The ideas are not an issue, and they are basically worthless, so don't get attached to them.

Dustin Williams Business Systems, Software Development, Information Technology

January 24th, 2016

I'm surprised no one has suggested that you look to join someone else's startup. 

Think about this a career change. If you wanted to become a restaurant owner, what do you think your chance of success would be if you've never worked in a restaurant? 

Martin Omansky Independent Venture Capital & Private Equity Professional

January 24th, 2016

Crowdfunding has its uses, but also some serious limits and flaws. Sent from my iPhone