In today's competitive startup landscape, securing funding has become both a pivotal milestone and a daunting challenge for entrepreneurs. As they embark on this journey, it's crucial to consider several key factors that can significantly impact the trajectory and ultimate success of their venture.
On November 3, 2023, Kajima and Rainmaking APAC co-hosted a Lunch & Learn session at The GEAR for startups and Kajima staff to learn about the startup investment landscape in the built environment with invited speakers Remi Choong, Principal, and Harleen Thakrat, VP Investment at Elev8.vc. Elev8.vc is a deep tech venture capital fund investing in early stage B2B startups with a focus in medtech, complex computing, and smart mobility.
They also answered burning questions on the different funding stages of a startup navigating the complexities of fundraising, and how make informed decisions as a startup founder.
Define the Why of Fundraising
One of the biggest misconceptions about raising money is that startups need a lot of it to build. As such, founders often chase capital blindly without specifying the why.
Understanding the end goal is crucial to shape a startup's trajectory; founders should first and foremost think about why they want to exit and if they even want to do so. Some founders may want to build and grow the business in the long term and choose not to exit until they find the right investor, buyer or partner.
Once the objectives are clear, startup founders should then weigh the pros and cons of the different funding sources before diving into the fundraising process as each offer varying degrees of control; whether they opt for venture capital (VC), angel investors, or bootstrapping, their choice will shape their startup's journey.
Understand the Customer First
Investors do evaluate whether the founders fit the problem they are trying to solve and if the market is big enough for the company to scale. Founders should ensure that their product resonates with their customers first before seeking funding.
For example, product-market fit varies in different parts of the world. In Indonesia, due to the disparate demographics and consumer behaviour patterns in cities like Bali and Jakarta, it makes segmenting and achieving product-customer fit the way to go instead.
Choose Investors Wisely and Timely
Before raising capital, founders should consider if fundraising aligns with their startup's vision. They should also identify the right type of investors for the stage they are in and know what the expectations are.
Different institutions have varying expectations and startups must be aware about the requirements before jumping into the deal. For example, with corporate strategic and institutional investors, there are more requirements from a governance perspective to provide access to data rooms during the due diligence process and detailed reporting required post-investment.
Founders need to assess if they are ready for this level of rigour assessment if they decide to take the money. Otherwise, organic growth might also be a viable option if the company is thriving without external funding.
If founders do eventually decide to go ahead with fundraising, they should meticulously evaluate potential investors. Research their backgrounds, credibility, past activities, the company they represent, and their intentions with the venture. They should choose investors who align with the current stage they are at, as well as the values and vision for the company.
Finding Alignment is Key
For hardware-driven deep tech ventures, it is important to look into the right kind of VCs who does research and has significant knowledge in the field, how the business model works, and what the requirements of the business are.
They should be able to help accelerate the startup by making introductions to their network of manufacturers, corporations, and etc.
It's Not Just About the Money
The startup journey is not just about securing capital but also bringing the right partners on board who can contribute meaningfully to the company’s growth. Focus on building long-term relationships with people who are a mentor or friend, are nothing but supportive of the entrepreneurship journey, and a trusted partner who can make introductions to strategic people.
This understanding is vital, especially for hardware and deep tech startups. Lay the groundwork by researching potential investors, understanding their portfolios, and identifying those aligned with their technology and market. Investors should be interested in more than just the current round; they must also demonstrate a commitment to long-term success and growth.
This article was written by Joey Jiahui Ong, Innovation Manager at Kajima Development.