Most startups begin life with a modest capital pooled from family and relatives, or a few hundred thousand dollars from an angel investor. This gives the budding startup enough cash flow to create a minimum viable product and, hopefully, gain enough traction to start attracting attention.
As the company gains traction, the initial funding begins to dry up and it’s time to look for investors to provide much needed cash injection. However, when you’ve already exhausted your immediate contacts, who do you look to to provide that much needed boost to take your startup to the next level?
Firstly, a startup could tap into angel investor networks, such as AngelList. This social network has become a popular way for private companies to raise funds from interested angel investors. This platform is useful, as it helps the potential investors to identify, track and invest in some early-stage companies. Several similar platforms exists to help connect investors to startups and vice versa. You can use such a database to create a long list of potential investors you can hit up.
If the startup is already showing early signs of success and differentiation from competitors, it’s also a good idea to start shopping for venture capital firms. The number of VCs have proliferated and while funding has slowed in the US, the rest of the world is still seeing a healthy dose of activity within the fundraising sector. Many VCs now specialize in specific sub sectors so be sure to research VCs that are relevant to your business and product before you add them to your investor list. One way of identifying relevant VCs is to look up online databases of startups and VCs. One popular platform is Crunchbase, which curates a database of private companies and investors. It lists basic information about startups, their funding rounds and the VCs involved.
When you have your long list, the fun begins. It’s time to start identifying the ones who will be interested to fund your startup and the ones you’ll have a good shot at!