Money to startups: how to attract an investor and where a novice startupper can find money

Author

Natalia Myronova

Google is teeming with stories of successful startups and that in the beginning there was an idea and then it became a bomb. But you can't just become a successful startup without funding. What would happen to the Google search engine founders Sergey Brin and Larry Page if they had not met smart money at the very beginning of the journey?

has been figuring out where to find an investor and what a novice startup should do to attract funding.

What a novice startup should talk about with an investor

As Igor Shoifot, a partner at TMT Investments, investor of more than 100 startups commented to , it is absolutely possible for a novice startup to find funding: investors are everywhere and at all times.

"The paradox of the present time is that the amount of money that is available for investment has not only not decreased, but even increased. The amount of money and the number of investors did not decrease for sure, you just need to be able to find them. You can find it on Startup Kotiki, VC Kitchen, AngelList and LinkedIn, and at a lot of events. You have to work on this. It is necessary to prepare not only the pitch, but most importantly—the business. If a startup is building an actively growing business, it will certainly be of interest to investors," he said.

According to Igor Shoifot, the main advice to novice startuppers is clarity and concreteness. The main mistake startups make is that during a product presentation, they talk about how they will be worth billions of dollars in many years. All the stories "how it will be good in the future" are of little interest to experienced investors. You need to focus on real figures. If they are not yet available, you need to do tests, spend money on advertising on Facebook and Google, look for partnerships, and achieve first sales.

Not just the majority, but I would venture to say 95-98% of startups do not prepare at all for a meeting with an investor. They seek to meet with investors by hook or by crook, but almost all of them come completely unprepared. They don't know what you've invested in, what your track record and focus are, what kind of fund it is, what the fund is focusing on, what the fund's strategy is. Given that all this information is available on the fund's website, and almost no one ever visits it, AngelList and LinkedIn—these are all free sources that you need to visit and search what are these investors interested in.

Igor Shoifot

partner at TMT Investments, investor of more than 100 startups

Igor Shoifot

partner at TMT Investments, investor of more than 100 startups

When meeting with an investor, it is necessary to present the business, how the processes are happening now: what are the distribution channels and the business model, what kind of technology is it and how it differs from others, how a startup deals with distribution channels, who are its partners and who are competitors, what is the real growth dynamics, how much does it cost to acquire a client, etc. That is, specifics, not stories about a wonderful future.

According to Igor Shoifot, most investors refuse startups, and one must be prepared for this. Starbucks founder Howard Schultz met with 242 investors, and 217 of them said "no". Refusals must be taken calmly, otherwise you can simply break down psychologically.

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Bank loan

A clear and availiable way to get money for a startup is a bank loan for an individual. For example, a consumer loan or a secured loan. In May 2020, the first loan for a startup development was granted in Ukraine. An entrepreneur from the city of Khmelnytskyi received an "Affordable Credit 5-7-9%" for his ecological business.

Most often, loans are given to companies with experience and a finished product.

Accelerators

Accelerator is a startup education program that takes the product to the next level. Startups that have a minimum viable product come to the accelerator. As part of acceleration, startups are helped to "pull up" the product in marketing, sales, help to find useful contacts, and sometimes—finance them.

Crowdfunding

Crowdfunding is a method of raising money using online platforms. The money is not given by the bank, but by people and companies. Money can be borrowed, exchanged for part of future income, or simply received for free.

There are services in Ukraine that do this, for example Спільнокошт and Startup.network.

Grants

Investments can be obtained from funds (both Ukrainian and international) on a competitive basis. For example, members of the Ukraininan Startup Fund competition committee compare startups according to such criteria as team, market, technology, product, development strategy.

Investors

And last but not least, item on our list are private investors.

It is very important to build a relationship with an investor, listen to what he needs, think about recommendations and even negative things. You don’t have to "cave in" to the investor, he often very poorly understands your subject. But it is worth thinking: why the investor did not understand you, why he did not believe into a business model, why does he think that there is no chance against competitors, why does he not believe in the growth of your sales market, why does he think that the pitch is weak or the presentation is not interesting?

Unfortunately, many startups treat investors as something one-time—"here I am, give me money, goodbye.» If you build communication with an investor, the chances of getting financing increase. You treat me right — and I right…

Igor Shoifot

partner at TMT Investments, investor of more than 100 startups

Igor Shoifot

partner at TMT Investments, investor of more than 100 startups