Danish entrepreneur Nicolaj Højer Nielsen recently published a book on start-up funding. Having been involved in the founding or funding of 13 companies, he has been active in the start-up scene since 1999.
Having been on both sides of the start-up equation, Nielsen hopes that his book will help new founders in the quest to secure funding.
Here are 5 tips that Nielsen discusses in the book:
- Don’t present your idea too early: Business ideas alone have no value for most investors. Rather, they are mainly concerned with what happens after the initial idea and how the founders are spending their time. For investors and banks, a mere idea means 100% risk.
- Know your needs: Nielsen mentions different types of funding, some companies do not require any external capital at all, others are very much needed to finance research and development work or marketing activities.
- Understand the investors: No start-up is like the other. While VCs and business angels like to take high risk with high profit opportunities, banks want to avoid any risk. What is important is that the small e-commerce company from next door appeals to different investors than a company that wants to become the next Facebook.
- Consider if you really need the money: Investors want shares in the start-up, and so a founder can quickly go from 100 per cent equity to only 17 per cent. Whether this is the right way depends the founder. Is it important for him them keep control, even through a small company
- Get your co-founder on board: A complementary founding team, which at least covers product development and sales, reduces the risk from the investor’s perspective. In the long term outsourced processes frighten investors, which is why it is sensible to build up a team that covers all relevant areas. According to Nielsen, when looking for a suitable co-founder the question should always be asked if you could imagine drinking with him or her a beer.
“You go on a five- or ten-year journey and spend more time with each other than with your spouses, so you have to find someone who shares the vision of the future,” says Nielsen.