“Finding funding is often underestimated by starting entrepreneurs,” says Vincent when we ask him about his practical experience and that of his colleagues. “Entrepreneurs are often proud of their innovation, but they mainly invest their time in developing their product or solution, (intended) customers and getting pilot projects off the ground. Attracting funding or investors is less top of mind. The reality is that investors can give your starting company a huge boost. Not only through capital, but also with knowledge of the sector, venture building and a network. As an entrepreneur, you have to be able to speak the language of the investors.”
Tip 1: Tell a good and coherent story
Vincent explains that a strong pitch to sell your solution to your target group usually does not convince investors. “The big difference is that you often first have to explain to an investor exactly which problem of your customer you are going to solve. Only when you make the pain of your target group clear with that story, can you explain your solution. This must result in a good revenue model, validated with customer data and your go-to-market strategy. It is important that you also calculate how big your market is and how much you can grow in the long term. In this way you outline a realistic and reliable growth path for your company that results in a concrete financing need.”
Tip 2: Know how much you are asking
Sounds like a very logical tip, but in practice it turns out to be quite a task to determine the financing requirement. This is based on the strategy, the business model and the intended growth path of the company. According to Vincent, when exactly you need how much money is different for every startup. “A lot depends on your revenue model, the phase your company is in and how quickly you can scale up your company. This results in, for example, when and how many employees you need to hire, but also how high the required development costs are before you can start generating turnover.”
Tip 3: Find the investor that suits you
According to Vincent, knowing which investors fit your business case is crucial to obtaining financing. “That can vary considerably per phase of your company. Bank financing is usually difficult to obtain without turnover, while friends and family may be able to help. Sometimes there are subsidies that fit your type of solution exactly. The MIT scheme, for example, is interesting for many innovative start-ups. There are also revenue models where your customer pays (partly) in advance and thus partly bears the development costs. Only when you are ready to scale up, you can usually call on Innovation Funds from RVO or Innovatiefonds Noord-Holland or private investors (business angels). Once you have generated the first traction in the market, ROM InWest and other public and private parties such as Venture Capital (VCs) come into the picture.”
Trusted in the sector
Regardless of the life phase, Vincent believes it is good to approach investors who are familiar with the sector in which you operate. “Pitching a consumer product quickly creates recognition, but a solution for the operating room really requires more technical investors. Because they know your intended playing field, they can help you put your solution and vision into practice in addition to the financial contribution. In this way, a well-suited investor not only helps you with money, but also with a relevant network and knowledge of the sector.” Vincent emphasizes that a conversation with a specialized VC that does not invest in your company is still of great added value. “If such a VC does refer you to someone in his or her network, this sharpens your pitch and possibly lays the foundation for follow-up conversations at a later stage in the development of your company. This way, you can even make a profit if you do not secure the intended investment. It is also good to keep a clear record of the feedback from investors.”
Tip 4: Give yourself time
Although more money has become available for start-up financing, attracting financing remains a lengthy process. Vincent: “On average, you have to count on a timeline of six months to nine months. Because the process is intensive and demands a lot from you as an entrepreneur, it also quickly distracts you from the daily operational matters. We often see underestimation in this. Our advice: start on time and ensure that you have sufficient lead time. Once you run out of money, it usually becomes even more difficult to raise money and you quickly find yourself with your back against the wall. You absolutely must avoid that.”
Strategically better choices
Vincent indicates that there are enough professional parties – both public and private – that can help entrepreneurs. “As a starting entrepreneur, you really don’t have to figure everything out on your own. And why would you fail unnecessarily when there are experts who can help you make better strategic choices? ROM InWest is one of those parties. Our Business Developers help countless entrepreneurs. The advantage of working with us is that we do not necessarily and only pursue financing; you can also come to us purely for advice and guidance. In addition to our own people, we have an extensive network of partners to whom we can refer you. In this way, we help you as best we can on your way to a new phase in life.”
