The statistics from Fundable shows that on average 1% of startups are funded by Venture Capital Funds or Business Angels. Fortunately, the funding percentage for startups in early and seed stages can reach up to 10% in Bulgaria. Despite the larger funding percent, getting funded in Bulgaria is also quite difficult and your chances are 1:10
Interested in increasing your chances of investment? Make sure to continue reading! The information you will see is based on Beyond pre-accelerator’s insights, gathered from different network partners all over the world, amongst which VC funds, accelerators, incubators, and private investors.
Stop for a second! Don’t yet rush down the text! Try and think as an investor for a second! What would your goals be? Let me help you! Investors would try to establish a balance between getting the highest return possible and lowering the risk. The point is that each company promises a 10x return but few (less than 5%) achieve it. That’s why early-stage investors are more focused on lowering the risks by checking the following parameters:
1. Traction. It is the most convincing factor for investors, because it shows that a product or service is valuable for users. In other words, you have achieved a product-market-fit. Need a guide towards it? Take a look at the questions below. As long as you are able to provide quality answers to their ask, your chances of getting funded are much higher:
- Does your company have users? – How many? How long have they been using your product/service for?
- Does your company have any customers (paying users)? – How many? What is the business model?; Do you have a recurring monthly revenue?
- What are your scaling plans?
2. Team. The second most important thing after traction is having a good team. Having a good idea and a team uncapable to execute it is much worse than having a terrible idea and a team which can make pretty much anything to make it work. Startups usually change their ideas several times until they find what works best for their needs. So, here is another set of questions that can guide you through the path to success:
- Does your team have previous experience in the industry?
- Is the team eager to learn and change?
- Is the team open-minded to pivot (modify the initial idea)?
- Is your team focused on execution?
3. Market Potential. As mentioned above, when funding startups, investors look towards at least 10x return on their investments. So here are some points to consider:
- Is your market big enough to deliver the return?
- Which is your company’s beachhead market?
- Do you have competitors? Having no competitors is not a good sign.
- What is your competitive advantage?
4. Idea. Last but not in terms of importance is the Idea. Promised, those are some of the final questions to go through:
- Is the idea you are working on unique?
- Do you and your (potential) investors have know-how, insights and contacts in the industry, which can contribute to your growth?
- Do you have a prototype/ MVP or are you working on one?
In conclusion if you have managed to provide sufficient/satisfactory answers to all the questions in the 4 points above, then you will probably raise some money soon. But if you struggle with Traction and Team, then it might be a good idea to join a pre-accelerator program. It will help you grow your team, validate the idea in an environment of people seeking innovation, widen your network and of course seek investment.
Clue: Chances to get an investment are bigger, when you are presented to investors by an intermediary– a friend, a pre-accelerator, a business partner, etc. For instance, VC partners of Beyond invested in 20% of the companies which were part of the pre-accelerator’s portfolio.