Funding cycles and the startup story go hand in hand. Planning out the financing strategy is something that many founders overlook. When raising funds, possibilities are limited to the type of company that you have: so it’s very important to know what is available to you before you decide on a strategy, especially if the success of your company is strictly dependent on how much funding you receive. There are many mistakes to avoid regarding financing, which have put an end to many businesses, and there are ways to prepare yourself to make things easier and be more efficient at finding the right financing route.

Having said that, there is no one-size fits all, and there is no precise to do list on what needs to be done to raise funds. Because ultimately it is a decision made by people and everyone makes their own individual decision. However, having knowledge of general trends certainly helps knowing what your chances are.

The first thing to think about as an entrepreneur is not funding, the first thing you need to think of is your ideal business strategy and how you are going to validate it, and whether you need funds or not is something that comes as a result of your strategy.

When you have a clear vision of where you want to take your company, your financing strategy will go along with your company growth story.

A good strategy can accompany you for a long time and save you significant time and money in the long run. Potentially, you can also adapt your strategy to the limits imposed by the market and target specific financing opportunities with the right business model.

Financing requires having a plan in place to prove a possible return on investment, communicating effectively with investors before and after the investment and developing a collaboration that goes beyond financing. It starts with inspiring prospective investors with your startup story, your achievements so far and how much further you can go. Putting your startup story in numbers validates what you have in mind or gives you information about strategies to implement early-on.

The reason why it is important to know where your company is going and which choices are available to you, is that different strategies create different valuations, and therefore also very different financing possibilities. Value, as well as the size of the opportunity, is a function of future profit, growth and risk, all elements that change depending on the type of strategy implemented.

Investments in large companies are more likely to be driven by factual information and a ROI. Instead, a start-up or small business investment, to some degree, comes from personal interest and experience, personal beliefs and wishes about the growth of a certain sector, the personality and ability to work with the founders. So, many are unlikely to invest in sectors that they are not familiar with, unless the business can generate a short-term return and provide synergies.

Of course, a certain Return on Investment is sought for startup investments as well. A sufficient return for VC investments can only be achieved by investing in large opportunities, so many try to portray their projects this way.

In doing so, however, many forget to make their story into something realistic. A good story is important to get the attention, but it also needs to hold in terms of numbers. Demonstrating that your assumptions are realistic with data will help you gain trust.

Before you create your company, there are some factors and potential risks to review: