The Biggest Fundraising Mistake Tech Startups Make

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By Andrew Tsopych
December 26, 2019

Have you ever worked in a place full of courageous and bold people, striving to bring into life too risky idea (at least from the first sight), having just 5-number payrolls per month?  Then it surely must be a startup. A total absence of healthy sleep for CEOs and everlasting troubles with fundraising is a little fancy package usually provided by nature along the way. Add some deadlines that must have been done by yesterday with annoying bugs following your project and you will receive an irrefragable image of a standard tech startup. 

In our experience, this is a typical company reaching us to tackle approximately a half of those problems. Having some skills in fundraising, we’ve seen plenty of teams rush into the development of an idea before truly understanding the requirements for a successful product and before validating the financial viability of the opportunity. Whereas the latter issue is usually solved by competent financial advisers or your own expertise, the first problem has to be addressed multiple times not only by the already existing team, yet by third parties as well. One may ask: “Why on Earth would I need more know-how-to’s when my undertaking is up and running?” 

Well, the answer is that until you face other difficulties, a proof of concept will likely be the roots of all of them. Picture a situation, when you’ve tried to approach dozens of potential investors. How many times have you been advised to “implement this feature” or “add that service” to get those angels/funds on board, but you couldn’t afford that as the app has gone far from their vision? The trick is to foresee such episodes and be able to adjust your wannabes to investor’s plans without additional costs. 

To be more precise, check out these articles written by successful entrepreneurs Emily Best and Preethi Kasireddy. They’ve spent months and years to close a single round due to strict boundaries their projects were put into. Countless opportunities with great checks and knowledge were missed. Of course nobody wants to find oneself in such situation, but the truth is: you probably will. 

One advice would be to contact a software house at least to refresh your opinion on how well a startup fits in the total market picture. The true power of software houses is their competence, you can be sure that your product will be up-to-date in accordance with market requirements, user experience and include brand new technologies, modern trends, new tools, useful tips and owned solutions. 

They work with limited technologies, which means that they are at old hand at them. Such software houses will boldly accept a project from a small startup as well as one from a trading niche – for them, it’s all about the tech used, not the “type” of the company.

Professionalism backed up with a massive experience from previous projects, tested methods, quicker implementation – all this is for the sole purpose to make sure your project is risk-free. Sooner or later, you’ll require constant IT architecture overviews of your app or service to build a long-lasting strategy for both: profitable running of a project plus flexibility during the fundraising stages. 

We know how IT and investments collide, thus it is in our best interests not only to make a smoothly running code, but a whole strategy from IT perspective to show off while pitching potential VCs. This method will shorten the amount of time spent on fundraising and will help avoid pay cuts to your main team. 

P.S. We don’t guarantee a comeback of CEOs healthy sleep, but we can advise some meditation practices to spend nights efficiently.)

By Andrew Tsopych
December 26, 2019

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