Startups funding mistakes: Most businesses have failed not because the concept was not an idea worth a billion dollars, but because of the errors caused by incompetence in knowledge.
You ‘re a budding entrepreneur and you’ve just thought about a multi-million business idea for Naira.
Where is it you are doing first? Well, first, you want your business plan to be written out and your market understand.
So what do you do next, after you’ve written your business plan? If you have a major savings or inheritance money reserve somewhere, the next move will be to get financing for the project.
Though bootstrapping is an option, you won’t get anywhere without some initial investment for many business models.
You are going to have to invest money to make it.
It can be hard to know how to go about finding funding for startups, particularly if one is new to the business world.
Furthermore, if it’s your first attempt to develop a company, you ‘re more likely to make mistakes. Never be afraid, we just got you.
Below we outlined 7 funding mistakes that should be avoided by entrepreneurs and startups while searching for funding to take their idea to the next level.
7 Startups and Entrepreneurs funding mistakes to avoid
1. No good Business plan
The first thing you want to do before finding financing is to draw up a professional business plan, as mentioned earlier.
The strategy provides an overview of forecasts of the daily sales, the demand for your company, indicators of progress, etc.
It should also include budget forecasts in a few weeks or months where possible.
For investors to take you seriously and take a chance on your start-up, an effective cash flow analysis is important.
2. Too much detail in the early stages
All right, we’ve just said a successful business plan is necessary to win over investors. Excessive information, however, can be a bad thing.
When you first pitch your idea, you may feel the need to go into painful detail on every feature of your business.
Although knowing these information is important for you, investors want your business to be presented widely at first glance.
You can also know the business better than they do, avoid the temptation to squander everything. The specifics will come up later.
3. Using only a few funding choices (startups funding mistakes)
Sitting down and assessing all of the funding options available to you can be overwhelming. And it’s an important part of your journey.
Typical financing approaches include getting a bank loan, borrowing from family and friends or having long-term investments.
When you don’t have sufficient collateral, the bank loan won’t fall through, and maybe your family and friends won’t have enough spare to fund you.
There’s other ways to try though.
Many of these are government grants and loans; the federal government is providing grants for many business sectors in Nigeria to promote development within that field.
One example is the system of government grants for the agricultural business
Certain sources for financing include non-profit organizations and private investors.
Searching for various sources of capital increases the chances to get the money you need.
The networking would also introduce you to the corporate world’s major players, as well as future mentors.
The donors or grants you are seeking for funding will be predominantly organizations that have funded businesses such as yours or similar companies.
This is because, as is common, they’ll be more likely to support your company.
In addition, they’ll have something to offer as you start growing your business in the way of mentorship.
It’s also prudent to take care of the parameters an investor uses to determine what companies to finance during your study.
The market value of your business idea and proven leadership skills could be these criteria.
This being said, it is important to think outside the box while finding start-up capital.
If you can show them how your idea can leverage their own market, investors who don’t usually finance your kind of business may still be interested.
5. Asking for too much or too little money (Startups funding mistakes)
You might be tempted to ask for more money than you need to be in order to feel confident while finding startup capital.
But, if you finally get the amount you’ve been hoping for, you ‘re likely to start losing your sense of urgency and the motivation that a company needs to thrive.
At the other hand, you might believe that if you apply for a bigger amount of money than you really need, the chances of receiving funding are higher.
That is not working. Second, most investors would see you underestimating the funding needed to succeed.
They would presume you don’t know what you’re doing.
Second, the money will run out very fast, even though you receive the funding, as it was never enough to start with. Everything you need is always best to ask.
True enough, it can be hard to know exactly how much money the company needs.
That could be a very wide range, depending on the business. In this case , the best way to go might be to talk with a financial advisor.
6. Giving away too much equity
Many investors would want a significant part of your company, in return for financing your business.
In other words, they want a lucrative equity share; this is a transaction that can not be reversed.
As you go through multiple funding rounds, various investors will ask for stakes in your company, but giving away too much will be a mistake.
This one of the greatest errors tech founders make in financing.
Ideally, investors will still have the majority stake even after securing support from the company.
No shareholder wants to end up becoming a minority investor of his or her own company when a business is profitable.
7. Getting swindled ( Startups Funding mistakes )
Every industry includes cheaters. Many times, if a funding incentive sounds too good to be true, it is.
You may be compelled by a scammer to enter into an arrangement by which you pay an upfront, non-refundable “processing fee” and get a loan in return.
What happens however, is that they later refuse you your loan for no reason whatsoever.
Most legitimate investors are not going to ask you to drop money until they invest in your project. Be alert!
While these funding mistakes may not seem so severe, they are very popular among startups
Funding is always one of the hardest parts of establishing a company.