Startups are born from a vision, a dream, but these ambitious ideas require funds to transform into reality and remain on the growth track. Most importantly, the founder needs to navigate the world of startup credits to secure funding to convert their vision into a concrete profitable venture.
India’s startup economy has been experiencing an upward trajectory. A clear indication of this comes from DPIIT, which has recognised a total of 80,152 startups officially. Startup credits are an essential component of this growth of the ecosystem. However, before securing these funds, you must note some standard procedures that could help you in your quest.
In this blog, we focus on startup credits and review some relevant approaches you must know before proceeding.
Guidelines for Startup Credit: What to Do and What to Avoid
Securing funds for your startup often requires following a few ground rules. For example:
5 Expert-Recommended Approaches for Securing Startup Credits
1. Have a Sound Business Plan
A sound business plan is not only essential for getting funds, but it also forms the basis for running a successful startup. Before meeting any investor, have a solid business plan ready.
Ideally, your business plan should convince the investor to believe in your vision and be willing to invest in it. Remember that a good idea can fail due to a lack of a good plan.
Also, your business plan should clearly explain your company goals, strategies and your vision to achieve them. So perfect your pitch before you present it.
2. Present a Clear and Lucid Timeline
A startup should have a milestone-based plan with clear timelines regarding what they wish to do in the next 2, 4, and 10 years before approaching investors for startup credits. Financial forecasts based on projected sales, market and economic indicators help investors make decisions.
Challenges and setbacks are part of a startup's journey. Make sure your timeline and milestones are realistic, take into account unforeseen situations and can be adjusted accordingly.
3. Focus on the Competition
Whether you are a pioneer in the market or entering an already inhabited market segment, you cannot ignore your competitors. Those looking at investing in your venture would like to know your competitive differentiation.
Present a clear picture of your competitors and how your business is a better investment compared to similar players in the market. This also highlights that you have accounted for risks and have made necessary adjustments to offset them.
4. Know Options For Startup Credits
Different fundraising formats are available for startups; understanding the advantages and disadvantages of each type can help the startup choose the best option for them.
If you are content to share ownership in your business, you can consider the equity route to raise funds. Conversely, if you do not want to dilute your stake, you can explore other options like crowdfunding, revenue-based financing and more.
5. Ask Only What You Need
When seeking startup credit, founders should raise an amount with a built-in cushion. You should raise enough money to reach profitability.
Asking for too much, especially when a business does not have a proven track record, can put off investors, and they would move to another lucrative option. You should be able to justify your bid, as in; being able to demonstrate why you need the asking amount.
At the same time, requesting less than the required funds can also cause problems and stall your operations.
3 Common Mistakes to Avoid When Seeking Startup Credit
1. Inflating Numbers When Seeking Startup Credit
You may feel optimistic about your venture and be tempted to overestimate your projections and growth targets to attract investment.
However, seasoned investors and industry veterans are more likely to see through inflated and unrealistic numbers and will not feel confident offering you an investment based on inflated projections.
2. Expecting Success on The First Go
Getting someone to invest in your business is not easy; the investor has to be convinced by your idea and your capability to execute it successfully.
You cannot expect the first person you meet to offer you funds, so a few rejections are likely. Securing startup credit requires time and patience; stay focused and motivated.
3. Forgetting the Importance of a Good Team
You may feel you have the capacity to manage a lot and can take care of many aspects of your business; however, it is impossible to do everything alone.
A successful venture needs a competent and skilled team; you should figure out your strengths and delegate the rest.
Final Thoughts
Securing startup credit is essential for a business. Investors, when funding a startup, look beyond just a visionary idea. They want to focus on numbers, the nitty-gritty, the profitability and the scalability of the business.
Scalix is an integrated platform connecting founders with a network of industry experts to help you navigate the world of investments and startups.
Learn more about our services; contact us now.
