5 Common Mistakes to Avoid When Seeking Funding For Startup

Tuesday, October 2nd, 2018

avoid startup mistakes

Seeking financing for your startup is one of the most daunting tasks faced by budding entrepreneurs. The world is littered with examples of failed startups. Most of the times, the root cause of this is one thing: Money. If you are about to embark on the self-rewarding journey of setting up your own startup, learn the lesson by not making the following same mistakes made by countless before you.

  1. Inadequate Market Research: You have an idea for a product or service which you think is brilliant and will be a game changer. Most of the times, startups are too attached with their idea, understandably so since it is their baby. However, before embarking on this journey make do these things:
  • Research if there is even a market for the product.
  • Not understanding the need of the customers. Your product needs to solve problems of people.
  • Do small market test runs with product to guide product development the right way.
  1. Giving Up Too Much Control: In the initial days when despite so many efforts, startups see no money tickling their way, they tend to get desperate. Most of the investors in early stages of finance want to have a stake in the equity of the company in return for their money.

Startup needs to realize that they will need investing in more than one stage thus it is important not to give too much equity in the beginning. Giving up too much control can end up making you a minority shareholder later on.

  1. Raising Too Much or Too Little Money: Too much or too little of anything is never good. It is important to understand exactly how much capital you are going to need at every stage of your startup by doing thorough valuation and analysis.
  • Having too much does give you some cushion, but money does not come free. With too much money at hand, you might be tempted to make decisions for which the startup is not ready.
  • Some startups play it safe by asking for too little money. This can also be a recipe for disaster, as you will run out of money soon. And will need to go through the entire process again, letting the investors know that you did not plan right.
  1. Targeting the Wrong Investors: Do not waste your time trying to get investment from a firm who has no history of lending to your industry or for startup financing. Or going to an investor who already has an investment in your competitor. Try to get investors, who also bring something to the table other than just money, it can be in the form of recruitment or product development or simple mentoring.
  2. Managing Your Employees: A brilliant idea can fail despite getting the funds because of something as simple as employee management.
  • Make your to designate one person as a leader.
  • Remember to work smartly and delegate work to team members.
  • Hiring too many people too soon or hiring inexperienced people.

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