There are 150 million startups in existence now, and 50 million new ones are created annually. On average - 137,000 companies are started each day. They are significant numbers, by any standard. However, the question remains: How many firms actually survive the fierce winds of change that have drastically changed today's startups?
Undoubtedly, there has been a major paradigm shift. And that modification has made it more difficult for startups as a whole to operate. These challenges can be broken down into:
- Increased levels of competition
- Unrealistic expectations
- Choosing competent applicants
- Co-founders jointly making decisions
- Cash-Flow Management
- If it's a tech company, take cyber security into account.
- Gaining the trust of customers
Everywhere there are issues. Startups in particular, as well as businesses in general, are not immune to the many challenges we currently face. While dealing with these challenges, there are strategies that might help businesses with their fundraising strategy.
How to Obtain Seed Capital for Startups?
A founder looking for funding for their startup must be knowledgeable about their sector. The key is to fully comprehend the market's features, including its size, pricing, client profiles, acquisition channels, ideal go-to-market approach, stage of technological adoption, and necessary staff skills, to name a few.
The two main strengths of the founders are their passion for the problem they are attempting to solve and their assurance that they can develop a viable business plan to back their solution. For this project, the founder needs to have a certain level of narrative talent and be well-versed about the product and of what he is building in the future.
An ardent creator will speak about the problem he's trying to address, blog about it on websites like Medium.com, and attend events. Since investors would Google him and the startup, all of this is incredibly helpful for the seed round fundraise! Thus, one needs to have a significant Google presence.
After the MVP (Minimum-Viable-Product) is produced, investors can feel secure knowing the product is accessible. However, since this is before revenue, there is a great deal of unpredictability. The more a founder puts into determining a product-market fit (PMF), the better his chances of receiving initial funding are.
Letters of support from potential distributors, manufacturers, and other important industries that can provide visibility of cash flows immediately after the investor invests capital would be excellent.
We've observed that raising startup capital is not only easy when there is an FMF (Founder-Market-Fit), but founders may also raise a sizeable sum of money. Examples for the same would be, 10club obtained $40 million in startup funding because of the founders' prior success. Kunal Shah raised $30 million by selling Freecharge to Snapdeal and using the proceeds to fund CRED.
Case Studies the Demonstrate How these Techniques Operate
Case Study 1
A customer of BPO (Business Process Outsourcing) needs venture capital funding. The company became a tech-enabled business, and the narrative was changed to show it as an impact enterprise. To tackle this, we set clear procedures and standards to assist the firm in meeting multiple impact metrics,
Case Study 2
The best organic certification (based in Europe) at the time was ECOCERT COSMOS V3, and a client with more than three decades of experience in FMCG and beauty product companies around the world created completely organic formulations of beauty products (for women, men, and children) that complied with this standard.
Since this company had no income, we did some background research. 28 distributors in India and the biggest distributor in the Middle East sent us emails asking for our products. Additionally, we got a certificate from ECOCERT COSMOS attesting to the products' 100% organic status.
Case Study 3
With $60 million in annual revenue, an IIT-JEE entrance preparation company started another company which gamified the K–12 curricula in the local tongue. We refocused the business by creating gamified content in regional languages as well.
Since the company wasn't earning much money, we changed the go-to-market approach and let them participate in extensive discussions with the government, which led to a significant distribution of the app among children attending government institutions. As a result, the company made INR 100 per student, totaling INR 350 million in profit.
Case Study 4
A retail pharmaceutical client's business was able to turn around, thanks to an innovative CRM, facial recognition software, a smart database manager with AI capabilities, robots that can retrieve medications from pharmacies, and a comprehensive offering that addresses lifestyle management and healthcare for all of its clients.
Case Study 5
Yet another ed-tech company was having trouble drawing more visitors to the courses on their website. We let them know about a recent development in which YouTube dramatically reduced the payments it pays to suppliers of video content for its website.
As a result, many well-known YouTube channels didn't earn as much as they had in the past. As per our recommendation, the ed-tech company should begin purchasing these YouTube channels. The company was able to succeed by acquiring these channels for as little as INR 8 per subscriber and diverting traffic from those channels to their platform.
Case Study 6
A provider of online short courses with video was struggling to get traction. We conducted an analysis and found that the marketing team was having problems convincing potential customers because they lacked trust. We told them about a workaround where the company teamed up with India's top online employment provider, which had a ton of jobs accessible on its platforms.
The jobs company developed a specialized call center and asserted that it would help job seekers secure the positions offered to advertise the Ed-Tech firm's courses to them on its website. The ed-tech company doubles the cost of its courses and splits the revenue from each course 50/50 with the job portal. Both firms saw significant growth.
When should startups consider raising money?
When a startup has already achieved PMF (Product-Market-Fit), which entails that primary and secondary market research has been finished, customer preferences have been mapped and incorporated into product/service features, types of offerings and their prices have been finalized, the go-to-market strategy and distributor/supply-chain tie-ups have been completed, and a strategic roadmap has been put in place, that is when it is best to raise capital.
Once the company starts to bring in some early revenue, potential investors feel confident enough to put money into marketing and other scaling-up operations.
At this moment, the founder can also enjoy a positive value as a reward for their hard work.