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Startup Fundings 101: Everything You Should Know to Get Funded in 2023

Stella Gradiana
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July 10, 2024

Getting funding for your startup can be a challenging task, especially when you're trying to secure it. With so many different options available, choosing the right one can be difficult. You can, however, increase your chances of getting the funding you need to make your business idea a reality by understanding the basics of startup funding. In this article, we'll cover everything you need to get started, from understanding different funding options to preparing for a successful pitch. You can take your business to the next level if you understand startup funding fundamentally, whether you are a startup veteran or a first-time entrepreneur.

A. How Does Startup Funding Work

Funding is typically needed to cover essential expenses, such as staffing and tools until the business is well-established enough to consider going public.

Although personal savings can be used, many founders seek funding from investors, including angels, crowdsourcing, and venture capital firms. Funding and equity offered in return depend on factors such as business maturity, risk, profit potential, and market size.

B. What are The Stages of Startup Funding?

Startup Funding is about raising capital to grow a new business. The funding source might be from your savings, relatives, or investors. Then, the startup founder will give shared stock ownership in return. There are six funding stages:

  1. Pre-Seed: At this stage, founders may use their own savings or obtain loans from family and friends to get their startup off the ground.
  2. Seed funding: Seed funding relies on investment from angel investors or networks. Therefore, founders should know the market opportunity and audience before moving to this stage. They must have a solid foundation to pitch to angel investors or networks.Β 
  3. Series A: Once a startup has achieved some key performance indicators, it can start thinking about the company's growth.At this stage, the company prepares a business plan model to raise equity crowdfunding.
  4. Series B: At this stage, a startup must have a market fit and typically secures funding from venture capital firms. The company may also start hiring employees for various positions.
  5. Series C: Tapping Series C funding means the company is ready to develop a new product, expand to the international market or increase the market valuation before going IPO.
  6. Series D: It is common for a startup to access series D funding for one of the following reasons: to go public or to fail to meet expectations after series C funding. Founders should aim to reach this stage 18-24 months before they run out of money from series C funding.

C. How Much Money Should a Founder Raise?

A startup's capital and funding requirements are not fixed. They vary according to a number of factors, including the business maturity, industry, and strategy of the business. Establish a Minimum Viable Operation, or the amount of money necessary to run your business. It includes payroll, equipment, licensing, and other basic necessities.

D. How Can You Find Investors for Your Business?

To find investors for your business, there are various funding sources available depending on the stage of your business. While most information is available online, networking can also provide valuable insights into startup funding.

  1. Take Some Loans. Consider taking out business loans from banks, although it is crucial to ensure that you meet all the requirements and have a strong financial history.
  2. Take part in startup events to get information you need about trends, strategies, and anything else you need to start a business. Meeting other founders at the event will allow you to get recommendations on investors, or you might get lucky and meet them there.
  3. Find Investors Online. Some angel investor networks, such as Investmennetwork. sg and Angin.id, or online crowdfunding, like SeedInvest, are available online. You can find a list of people or companies willing to lend their money to help you establish the businesses. Some profiles come up with preferences for the business industry to fund. Take your time to research which investors might suit your business well.
  4. Government Programs: The Ministry of Communications and Information Technology of Indonesia supports startups with Hub.id to help connect businesses with investors, establish summits, and other programs. At the same time, Singapore Government provides mentorship and capital for startup founders through Grants.

E.Β  Are There Any Tips for Negotiating with Investors

When negotiating with investors, there are several tips that can help you secure a beneficial deal for your business:

  1. Conduct thorough research on your potential investors before pitching to them. This can involve checking their LinkedIn profiles, reading articles related to them, and analyzing their previous deals to understand their preferences and interests.
  2. Clearly articulate what you want to achieve with your business and how it can solve problems for customers while highlighting its growth potential. Be concise in your pitch and demonstrate your understanding of your competitors.
  3. Consider offering both equity and debt as a means of attracting investors. Debt can be an attractive option for some investors as repayments are usually prioritized. It's crucial to calculate well the implications of debt and equity before making a decision. You may also consider consulting with an accountant to understand the financial implications of different investment structures.
  4. Ask questions to understand the investors' needs and preferences. This shows that you are interested in building a mutually beneficial relationship.
  5. Remain professional at all times, even when dealing with difficult investors. Keep your focus on your goals and maintain your composure in all interactions.

In conclusion, startup funding is a crucial aspect of bringing your business idea to life. By understanding the basics of startup funding and the various funding options available, you can increase your chances of securing the funding you need. From pre-seed to series D, each funding stage has its own requirements, and it's essential to be well-prepared to pitch to investors. Remember to conduct thorough research, clearly articulate your business plan, consider offering both equity and debt, and remain professional during negotiations. With these tips in mind, you can take your business to the next level and make your entrepreneurial dreams a reality.

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