Vijay Anand | The Startup Guy.

Is your Startup Fundable?

Posted on: August 4, 2007

Every startup these days seems to have “Funding” as their first milestone that they need to achieve. I am personally a bit scared of and for those startups, as funding might be quite relatively an easy milestone to achieve – given that the other metrics are in place. What a startup should aim for, is clients, traction and validation – along with partners. Once those are in place, funding will be a piece of cake for most investors.

So, Here’s the by-the-book stages that a startup should go through before they can think about approaching a VC:

Stage 1. Market Analysis : Solution to a niche
Exactly identifying the pain point you are addressing? How much are people willing to pay for a solution for it? It is unbearable? How big is your market? The TAM,SAM, SOM bits. The competition. etc etc.

TAM – Total Available Market
SAM – Served Available Market
SOM – Share of Market

Stage 2. Solution Formulation (or) Ideation
Freezing in on the solution.

Stage 3. Validation
Meet with potential partners, clients and industry veterans to hear what they have to say.

Stage 4. Team, along with mentors
Put together the core team, and please get your mentor onboard.

Stage 5. Organizational Structure
Define who does what.

Stage 6. Business Model
How would you make revenue and what is the roadmap of the product as to when it can reach that place.

Stage 7. First Prototype
Build the first prototype. You can shut yourself from the world while you do this. Keep absolute focus on ensuring that what you built is what you set out for – too many teams start off with something and end up building something else. If you want to change your direction, follow steps 1 – 6 all over again.

Stage 8. Mindshare building
Start your first set of PR activities. Blogs, invites, product launches. This is where Proto can help.

Stage 9. Funding Possibilities – Angel Round
Identify an angel for your first round and get them onboard – preferably someone who has experience in that sector.

Stage 10. Scale up / Ramp up operations
This is where you unleash your product into the world. Too many times entrepreneurs will realize that when they do unleash, the world is quite indifferent to it all. I hope that is not the case with your product – shouldnt be if you had done your market analysis and was able to build the product before someone else shaved off a part of your market.

Stage 11. Expansion: Venture Capital
Finally, you get to a VC. Steps one to ten would have the history a venture capital firm would require to evaluate, validate, and put some numbers in terms of valuation and growth.

Which stage are you in?

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3 Responses to "Is your Startup Fundable?"

Good Summary…recently I also read an article on economic times on how big companies in India organize competitions of sort for people to bring in their new ideas and business strategies…and imbibe from them…they were talking about such moves to be Ideation grounds…agreed not totally related to this article but just wanted to mention it as it related to more openness becoming obvious in well settled companies!

[…] clearly what you are looking for. If you are looking for Funding, please go through this blog post [Is your Startup Fundable?] to make sure that you are on track and at the right […]

Nice writeup.

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