Posted by Early Growth
February 2, 2017 | 4-minute read (646 words)
How does a startup that isn’t tech focused stand out and gain investment to scale?
That is one of the big questions that comes our way often. While purely digital services like Snapchat may make headlines with their unicorn level of multibillion dollar achievement there is more than enough money on the table for everyone if you do your homework and have answers to some key questions.
Every year within the startup ecosystem the world’s total number of startups sees 100 million businesses launched, 400,000 of those are being created in the US. Within just the US industry reports show VC investment has risen sharply by over 90% from 2013 to 2014. In 2015 $58.5 billion has been pumped in. While software is the favored frontrunner there is room for others to capture that cash.
Is the pitch process any different?
As with any business seeking to prove growth you should be rock solid in answering nuts and bolts questions. Make sure you have a solid grasp on who is your customer. How well do you know them? What are their problems that you are solving and what are their alternatives? How do you plan to find them and how wide of a net is there? Tech or non-tech oriented these fundamentals won’t change. Investors always want to know how likely is their money to grow by helping you grow.
The part that changes for non-tech based startups is on the interpersonal and stickiness of the community built. You will want to show that you have a thriving community of solid adopters. Creativity and thinking out of the box is essential as is putting a face in front of people. Recent food company startups Blue Bottle and Shake Shack are great examples of growing businesses being aggressively scaled that focused on proving they can deliver solid customer interest first.
Who are the ideal investors, and how should you target them?
While VCs are the whale of the money pool in business development we strongly recommend looking beyond them. Be open to alternative types of investment that in turn will be more open to you. Tapping the angel community becomes crucial, find out what networks of them exist in your city.
In addition to angel networks many existing corporations have strong investment possibilities especially if there is synergy with their core proficiencies. For instance, Big Alcohol and its distributors seeking to leverage their extensive delivery networks have been funneling funds towards cannabis startups.
There is also contests and competitions that should be considered, from local ones to televised ones such as Shark Tank. In fact, we have had one previous client, Loliware, who did exactly that and went in seeking $100,000. They came away with offers of over $600,000 and offers continued beyond that event generated by the buzz of interest it caused. A novel product that captures attention in a competition can stir excitement for investment greater than the award possibilities alone.
Lastly, crowdfunding is a natural extension for those companies who have built a loyal following to utilize that to their advantage. It is a multibillion dollar industry that only keeps growing larger and larger.
One of the recent trends that’s been exploding for non-tech investment is food oriented businesses such as Blue Apron, Hello Fresh and similar personal sized meal services. While they utilize tech in the form of ordering through the site or app that is not their focus. Beyond the home cooking vendors there is also superfood themed smoothies & soup products like former client Daily-Harvest.
We see possibility and growth for a variety of startup categories ahead and are always glad to provide the sound financial advice that every business needs. If you would like to know more about how to manage your finances and prepare for investors reach out and contact us.