By Kyrillos Akritidis
Venture capital (VC) funding is often the lifeline for startups seeking to grow rapidly and achieve their ambitious goals. However, with global startup investments growing somewhat more strained in recent years, securing funds has become more challenging than ever.
Startup funding in 2024 did not achieve much of a difference in the YOY perspective, rising only 3% from 2023 ($304B to $314B). But at the same time, the number of funding deals has seen a decline – 6,056 transactions in Q3 2024, which is the lowest it’s been since 2020. This clearly shows that investors have grown a lot more sensitive about where they put their money.
It’s no longer just about having a brilliant idea; startups must demonstrate good prospects, robust planning, and have a clear value to investors. If you’re a startup founder trying to find your way in a highly competitive landscape, this article may offer you some practical ideas and guide you on a path to success.
Understand Your Funding Needs and Timeline
Before you can even think about approaching VC investors, you need to assess whether your startup truly needs external funding at its current stage of development. If the answer is “yes”, then you need to determine precisely how the new funds would be used and establish a timeline for your funding needs.
Investors appreciate it when projects can offer them a concrete plan and an understanding of where their money would be going. 2024 has seen a sharp rise in startup failure rate in the U.S. (a surge of 60%), as startups went bankrupt even when they had venture backing. Given this backdrop, it makes perfect sense why investors would become a lot more cautious.
So here’s what you can do.
First of all, make sure to plan ahead, knowing when you’ll need your next round of funding. This way, you can start discussing things with investors early, reducing the risk of running out of funding at a wrong time. By demonstrating a forward-thinking approach, you will show investors that your startup is well-prepared and has long-term plans, which would paint you in a favorable light.
Another helpful thing to do is dividing your startup’s growth plans into stages, with funding needs being clearly separated into categories (Seed, Series A, and so on). Set realistic and measurable goals for each stage. You can, for example, seek to expand your user base to a specific number, launch new features, or achieve a particular revenue volume during each of the phases. An important thing here is not to overreach: don’t try to sell investors overblown target figures, because it will severely undermine trust if you fail to reach them.
Build a Detailed Business Plan and Financial Forecast
Continuing from our previous point, your business plan is, for all intents and purposes, your face so you can definitely expect investors to scrutinize it forwards and backwards. As such, you need to make it as clear-cut as presentable as can be.
Make sure to clearly outline your value proposition and explain what your startup is deserving of their money. What problem do you solve, why does it do a better job of it than the competitors, what are the key advantages that you believe will help you find success? All these questions need to be answered so that investors can make their own projections about your future prospects and decide whether or not to believe in you.
I will also highlight once again that having precise financial projections will be advantageous here and that you should avoid inflated numbers. Transparency is necessary to build credibility: if you show bloated expectations and then fail to live up to them, it risks undermining your position.
Lastly, a strong plan should also include scenarios for potential challenges and how you plan to deal with them. The business landscape is constantly shifting, so expecting a smooth sailing at all times would be naïve. When things go wrong, you need to be ready to deal with them, and it is best to prepare well in advance. Showing investors that you’ve considered risks and strategies to minimize them will position your project as a well-organized one, boosting your appeal.
Due Diligence Preparation
Aside from your business plan, investors will also want to examine all your official documentation in detail. Having grown cautious as they have, nobody wants to risk running into problems with regulators. As such, your startup must be prepared to provide all relevant documentation that pertains to your financial, legal, and operational integrity. This includes financial statements, tax filings, employment records, and so on.
Contracts with clients, suppliers, and partners must also be clear, up-to-date, and compliant with legal standards to demonstrate operational stability. And if you have any patents and intellectual property, you should ensure that they are properly protected and that your innovations are safe.
The importance of a well-prepared due diligence package truly can’t be overstated — it signals to potential investors that your company is professional and reliable, building trust and making the investment process that much smoother.
VC Support is Not Just About the Money
Having venture support can be helpful in a variety of ways, and not all of it comes down to funding alone. Investors also bring with them industry expertise, previous connections, and the ability to help you with strategic guidance — all things that can be invaluable to a startup that’s freshly starting out.
In order to harness all of these potential benefits, you need to dig deep and start asking the right questions. Such as: “What additional resources, beyond funding, does your project need to grow?” or “Which of those advantages can this particular investor provide?”
Whether it’s mentorship, or helping your recruit capable talents into the team, or facilitating networking and connecting you to potential partners, VC support can be a powerful tool for you to wield.
Kyrillos Akritidis
