Common mistakes startups make when applying for funding

If you’re trying to raise funding for a conventional business or idea like a franchise or service business... Securing VC funding is not for the impatient: Business analysis, building th

There is a perception among entrepreneurs that a revolutionary idea is enough to secure

the venture capital needed to kick-start

their businesses

This is simply not true

Here are five of the most common mistakes made by entrepreneurs when applying for VC

funding

1 No WOW! Factor

The first rule in the VC

game is that your business proposition

must have an exceptional differentiating factor

You need to know what

your sustainable competitive advantage

will be

If you’re trying to raise

funding for a conventional business or idea like a franchise or

service business

VC is probably not the right place to start looking

For the best chance of success

1 No WOW! Factor

for

1

Be sure your business has that x-factor

2

Do your Research

b Call them first to

clarify before applying and wasting both your time and theirs

2 Expecting a 24-hour turnaround

A large number of applicants turn to VC funding at the eleventh

hour as a last-ditch effort before running

out of capital

Securing VC funding is not for the impatient: Business analysis, building

the investment case, approval, due diligence, and legal and financial

structuring are undertaken with meticulous care and attention to detail

Plan for a longer process than you imagined as it could take a number of months depending on the deal size and stage

of the business

2 Expecting a 24-hour turnaround For the best chance of success

for

2

Plan for the long run get to know the VC funds and managers The vast majority of deals are done through referrals and existing relationships

3 Touting an untested idea

VC analysts and fund managers are unlikely to

be swayed on the strength of a business

plan alone

For the best chance of

success, develop a working prototype or some basic software

VC funds respect entrepreneurs who have

risked their own funds and resources to get their big idea off the

ground

For the best chance of success

for

3 Touting an untested idea

1

Before hitting the VC trail, build that prototype or get your software to a

test group

2

Develop a solid business plan that

clearly spells out the potential for your unique solution to a specific market’s

burning need

3

Avoid jargon in your business plan, make doubly sure it’s free of errors, and tailor it to the fund’s specific

mandate

4 Neglecting the real numbers

A solid business plan is

not based on assumptions

VC funds want to see

market research reflecting real data to

back the financial

projections

They want to fund entrepreneurs with an in-depth understanding of

the market

both locally and internationally

For the best chance of success

for

4 Neglecting the real numbers

1

Do your own research this gives you better, direct insight There is plethora

of online tools that enable you to

gather data quickly and affordably

2

Be sure to do a detailed competitor analysis, where you compare your solution to others on a feature-by-feature basis Also consider future territories and include relevant data

and sources

5 Lacking a clear development path

Too few entrepreneurs

have a clear understanding of how

much funding they actually require for the

next stage of their

business

And sometimes are even unclear about what the critical goal is that the

funding is to help

achieve

You lose credibility if you return to the market for more funding without having made significant

progress

For the best chance of success

for

5 Lacking a clear development path

1

Be clear about why the funding is needed and what it will help you

achieve

2

You need to determine how much

actually need and not how much you think you should raise based on ‘norms’

— the more you raise in the early stage

of your business, the more equity you

will have to give up

3

At the same time, make sure you raise enough to get you to the next phase, and work on the funding carrying you

for 18-24 months

Now avoid these Common mistakes

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