3 Biggest Mistakes Startups Make When Fundraising

Startups always seem to be in a race to raise money. In the early days, it’s all about surviving and proving the technology or product works. Once that’s done, it’s time to start bringing in paying customers and scaling the business. But in order to do that, most startups need more money. So they go out and try to raise money from investors. But fundraising is hard. And there are a lot of mistakes that startups make when trying to raise money. Here are three of the biggest mistakes:

1) Having no clear plan for how the money will be used

One of the most important things to have when pitching to investors is a clear and concise plan for how the money will be used. This shows that you have thought about the problem and have a vision for how to solve it. It also shows that you are disciplined with your spending and are not just looking for a “blank check” to spend as you please. Investors want to know that their money is going to be used wisely and that you have a plan for growing the business.

2) Not having a diversified group of investors

It’s important to have a diversified group of investors because it de-risks the investment for them. If one investor pulls out, it’s not the end of the world. And if one investor does well, it doesn’t mean that the others did poorly. This is especially important in the early days when there is more risk involved and businesses are less proven. So don’t just go after one type of investor; try to get a mix of venture capitalists, angels, and even friends and family.

3) Asking for too much or too little money

This is a tough one because there is no exact science to it. It really depends on the business and what stage it is at. But in general, you want to raise enough money to reach your next milestones but not so much that you are “over funded” and have too much cash on hand (which can lead to wasteful spending). It’s also important not to ask for too little because then you will just have to go back to investors sooner than later which can be frustrating for them (and costly for you in terms of time and energy).  So how do you determine how much to raise? A good rule of thumb is 12-18 months of runway which should give you enough time to reach your milestones and prove out the business model. But again, this varies depending on the business so make sure you do your homework before making an ask.

Fundraising is hard but it’s an essential part of growing a startup company. And while there is no surefire formula for success, avoiding these three mistakes will put you in a much better position when trying to raise money from investors.

Stealth Bioenergy and Biotechnology Consulting is comprised of experienced industry leaders who can help guide clients through the fundraising process. We have a proven track record of success in securing funding from government agencies, foundations, and private investors. Our team has a deep understanding of the bioeconomy, and we use this knowledge to create customized solutions that maximize our clients' chances of success. We are committed to helping our clients achieve their goals, and we will work tirelessly to help them secure the funding they need to grow and thrive. Contact us today to learn more about how we can help you raise the capital you need to succeed.