How to fundraise in a crowded space

Consider the various stages at which you might think it wise to look for external money; when you have had that embryonic idea in the shower/pub, it is probably too early.

When you have sat down and emptied your head on to paper and perhaps shared that idea with some other willing parties, it is probably still too early. 

When a bunch of you have quit your full time day jobs and are eking out an existence, writing code in a drafty basement somewhere; maybe, it is time to start looking. 

But where to look? It is such a huge world out there and surely Facebook or Google will want to come along and snap my idea up for billions of dollars? Wrong. 

Consider the amount of start-ups out there, over 500k new registered businesses in the UK along this year, multiply that by five for the US and you have some idea of the amount of competition you face in taking some money in from external investors. 

The Instagrams of this world are literally one in a million, and unless you have a business that has somehow managed to amass millions of users that have signed up to, whether for free or not, the reality is that you need to approach this the traditional way. 

Go and build something that works, call it an MVP (minimum viable product) if you wish, go and get some customers to use it (ideally for some ££) but don’t worry about giving it away for free at this stage– the most important thing here is to get some “feedback”. 

This is crucial because if what you are selling, is not what people are prepared to pay for, you need to change direction. You are looking for a repeatable (and scalable) business model that customers will come back to, and will be prepared to pay you for. 

Once you have one or ideally five to ten of these, then it is time to start really ramping up to raise external funds. Put together a good looking slide deck, not a lengthy business plan; make sure your deck is visual, make sure it talks about the three most important things investors want to see, The Team, The Finances and The TAM ( Total Addressable Market) – How much is your market potentially worth, how much could you get of it? If it is a new market, how can you show you are the right people to take this product to market?

If you are raising anything in the 100-750k range, forget VCs – they really want to see an established product, large repeat revenues and reference customers. Go straight to Angels, and, if you are in the UK make sure you are registered for EIS (Enterprise Investment Scheme) or SEIS (Seed Enterprise Investment Scheme). 

SEIS is good for the first £150k you raise and has huge benefits for the investor. The Angel Investment Network is a good place to find Angels, or for smaller raises try Seedrs, or similar crowd funding sites.

Dan Collier is CEO and founder of Elevate Direct

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