A founder shares tips on how to raise funds for your early-stage startup

Startup founders should be commended for their bravery, particularly those who drop everything to pursue innovation. It’s difficult to admit, but founders can sometimes wander before finding their bearings. YouTube, for example, began as a dating service called ‘Tune in Hook Up’!

So it’s fine for a founder to constantly work on validating theories and experimenting, knowing that they won’t be able to figure everything out right away. As long as the end goal is in sight, a startup is ‘allowed’ to start (pun intended) rough around the edges.

Another critical factor (perhaps the most important, in my opinion) is funding.

Startups require consistent funding to help them bring their (sometimes groundbreaking) ideas to fruition. The inability of a startup to raise sufficient funds may spell the end of/affect the realization of their ideas! So it’s definitely worthwhile to investigate the best methods of acquiring funds.

This is not to say that once you’ve reached your goal, your work is done! In reality, this is just the beginning. You should be aware that you will still need to sustain your business, which means you will need a consistent inflow of funds.

And if you want to keep scaling this business, you’ll need to ramp up your efforts to raise more funds from partners, investors, and so on, which means more challenges to anticipate and plan for.

So, if we’re being honest, there’s no talking about early-stage startups without mentioning funding, but not everyone knows how to go about it, what tips to help, and so on, so we shone the light on Toks!

Clooper founder Toks Adebiyi raised £400,000 in seed funding from Crowdcube investors, including a significant contribution from Paul Rothwell, MD of commercial-to-residential developer and landlord Empire Property, and continues to do so to this day.

We caught up with Toks for funding advice, so grab your jotting pads, highlight wherever you can, bookmark this page and get ready to learn a̵ ̵t̵h̵i̵n̵g̵ ̵o̵r̵ ̵t̵w̵o̵ a whole lot!

What should you know before raising money for your early-stage startup?

Raising funds for your startup may be one of the most difficult things you will ever do, so be prepared to get your hands dirty and work very hard for up to a year to be successful at it.

These four factors will help set you up for success:

First and foremost, I recommend that you read Bill Fisher’s excellent book “Raising Capital: An Insider’s Guide for Entrepreneurs.” This book seems to have become the bible for raising funds for startups.

Second, be prepared to speak with people repeatedly, and don’t expect anyone to call you back!

Third, raising capital is a humbling experience, and the sooner you realize this, the better. You should throw all pride aside and be prepared to ask and convince people in your network to either directly invest in your company or connect you to someone who can. I cannot emphasize how important this is in meeting your funding goal.

Finally, if you live in the United Kingdom, try to secure your EIS and SEIS Advance Assurance as a tax incentive for Angel investors (if you intend to go this route). Seedlegals is a helpful resource in this regard.

Share 2 things to think about when raising funds for your early-stage startup

Securing your lead investor and the valuation of your company are 2 very important factors to consider when raising capital for your early-stage startup.

Your lead investor is the driving force behind your raise and can be the deciding factor in whether or not you meet your funding goal. Prepare to work extra hard for this, and I strongly advise you to start by looking through your phonebook. I strongly believe that the lead investors for early-stage startups can be found in the phonebooks of their founders! This was certainly true in my case.

The valuation of your company comes next. As a startup in its early stages, you are likely to be pre-revenue or have little revenue. As a result, valuing your company will be an art rather than a science. Your goal is to get this as high as possible, whereas your investor’s goal is likely to be the opposite. The book I recommended above explains how to do this, and you should put in extra effort to convince your lead investor that your company is worth what you believe it is. Your entire valuation in this funding round will most likely be determined by what you agree with your lead investor.

Share 5 strategies for raising funds for your early-stage startup

You can use the following methods to raise funds for your early-stage startup:

Venture Capitalists (VC’s)

Individual Angel Investors

Angel Groups

Crowdfunding

Strategic Investors (typically large corporations)

Please share 3 pointers for when you finally reach your funding goal

The finish line is when the money is in the bank. Never before.

Celebrate your achievement. The journey has only just begun, and there will be many more formidable obstacles along the way, so taking time to celebrate what is a huge accomplishment serves as great mental preparation for the journey ahead.

Remember to thank those who assisted you in reaching your funding goals and to publicize your accomplishments.

What factors aided you in obtaining funding?

We had a strong case for funding for the following reasons:

We had assembled a team of highly capable individuals with many years of experience in the sector we operate in.

We built a live and working minimum viable product that our investors believed in

We had secured half of the required target amount from our lead investor.

We were tax efficient with both SEIS and EIS Advance Assurance

Other startup funding advice from a founder like you?

Your business and fundraising success will largely depend on the strength of the team you are able to put together. I urge you to resist the temptation to form a team of clones of yourself and instead form a diverse team of capable individuals who are not yes men/women. When the going gets tough, and it will, these are the people who will make the dream worthwhile to fight for.

The startup journey can be a lonely path but you don’t have to go on it alone.

This post is not intended to constitute financial and/or legal advice.