Published on May 23rd, 2017 | by Jose Vasquez0
The 4 Mistakes Startup Tech Companies Make When Seeking Funding
Almost all tech startups need funding to get started, but these mistakes are all too common.
Your business needs capital in order to succeed, but the pursuit of obtaining that capital can incur some crucial, devastating mistakes. You’ll need to think carefully and critically about how, why, and when you seek funding, or else you’ll be liable to make one of these common errors:
- Neglecting the consequences. There are always side effects and consequences to getting funding. For example, if you get capital from venture capitalists, you’ll likely end up forfeiting partial ownership of your company. That may not seem like a big deal now, but it will when you start making major decisions.
- Asking for the wrong amount. Asking for too little money will leave you with a funding gap, potentially when you need capital the most. That means you’ll need to go through the whole process again, and you might not be as successful the second time. On the other hand, you could wind up asking for too much. If that’s the case, you could overspend, or give up more shares than you needed to.
- Choosing the wrong vehicle. There are many different ways to get funding, including angel investors, lenders, and crowdfunding. There are advantages and disadvantages to each, so choosing the wrong platform could be devastating to your chances of eventual success.
- Overstating your profitability. It’s tempting to exaggerate the numbers to make your startup seem as profitable and as much of a “sure bet” as possible. However, this will harm your reputation and your chances of success in the long run. Not only could this constitute fraud (in egregious cases), it’s also going to make your investors second-guess your business model when you fail to hit your initial estimates.
These aren’t the only mistakes startup tech companies can make, but they are some of the most prevalent. Don’t let your desperation for funding ruin your startup’s potential future.