How entrepreneurs get funded - a view of non-financial guy!

Hundreds of thousands of people want to become entrepreneurs. Each of them have an idea and they think it is unique. And some may be 'me too' ventures of which some may be with some value add. And the common issue is 'MONEY' and each one of them want some one to fund their venture.  I am not an entrepreneur, not an investor, not one one Venture funding background. But, here is what I think what goes in those funding circles.

1. You have been Successful once

Once you have been successful in one venture, many are willing to bet on you. There is no guarantee that you will succeed in second and third venture, but the funding agencies are more than willing to fund them without thinking much. Just your previous record is enough!

2. You have been a successful and visible Top Executive

You have been a CXO or a President ...whatever and have been in news either because of company's reputation or your achievements.  When you resign and decide to start your own,  I bet there are many funding agencies willing to fund you. Sometimes, you may be a successful top level techie in your field who want to start your own and you may not get investors as they doubt your 'marketing skills'. Don't get disheartened.  Find a partner who can 'TALK'  ! 

3. You a serial Entrepreneur

You know the trick. I don't know it. So , I can not comment on this

4. You are running a company successfully

You started small and managed to make an impression in the market. People know about you. The funding agencies see the market potential and may be willing to fund you to ramp up higher with some financial support. 

5. You  know some one in Venture Capital (VC) network

It is easy if you know some one in the Funding business. The friend will guide you with all the documentation and projections

6.  You are a fresher from campus

Your campus has an Entrepreneur club. The club guides you  in documentation. And the club may be inviting Investors to pick and choose best venture and fund it

7.  You have a crazy idea.

You have a crazy idea and 99.99% investors find it crazy and not worth funding. That one investor may like the madness of your app/solution. There are people who take risks. Did we not hear some one investing in $1 million in YO! ( I am not calling it crazy! ) ? If you have crazy idea, you need to wait for the funding crazily :-)

8. Me too companies !

There is one successful model already running in market. You see the potential in that business. Being  'Me too' also helps. But, you need to have strategy of making a dent in the market and put up a fight with the market leader. There are many people ready to invest in 'Me too' companies.  See how many e-commerce, e-learning and  training companies are funded every day.

9. Now comes the 99% of commoners

These are the guys who are either fresh or working and have no high level contacts. They have an idea and no clue how to make a business plan and how to make that elevator pitch and they do not have an excel sheet showing  loss in first two years and turning it around in third year and make bumper profits from  fifth year !  You learn that first.  It is not sufficient if you are convinced that it is a great idea. You need to convince others that you can monetize your idea. 

The biggest dilemma is to

a. Just go with idea to a VC?

This is a bit difficult to convince a VC.  If you need money even to make a prototype, you may try this

 b. Make a prototype and go to a VC ?

I think, this is better as it gives a good feel of what you want to do and if you  CAN do. But, you need to take care of all the finances to make a prototype, whether it works or not. And you are confused as to what to do if prototype is working and not getting funded. You need to have a plan to roll it yourself without funding.

c. Make a full fledged website/APP/product and go to a VC ?

This is also a tricky. You somehow managed to make a full fledged solution. It is working and few people  are using. If you are lucky, a VC may see value in it.  But, it has a catch attached to it. If you manage well in first 2-3 years and try to get funding, it may be easier.  If you have completed some 6-7 years and then need funding to ramp up every one will ask what is that you are going to do dramatically now, which you could not do in last 6 years!  Have an Excel sheet ? But, need  a lot of real justification to be done to convince the Funding agencies.

There are hundreds people who discourage you. Irrespective of any of the above categories, if you are convinced, 'Just do it' !

All the best !

Photo credits-https://businesstoideas.blogspot.in/2011/03/business-idea-suitcase-of-money.html