For those of us who have never raised capital or built a startup before, there's a commonly-held myth that startups get funded with great ideas.
If the idea is so wonderful, an anxious investor will jump at the idea to get rich with an early investment. It must be true — we saw it on Shark Tank!
The truth is, startups get funded at all different stages, from the initial idea all the way up through proven traction. The problem is that the uninitiated don't quite understand what the difference is.
If the idea is just that — an idea — and there's no other development or traction to the business, the only likely funding sources are going to be our credit cards and perhaps an incredibly supportive relative.
Short of that, "just ideas' have very few takers.
Once that idea has gone through some validation and research, and has been morphed into a coherent business plan or pitch deck, it's possible that plan can be funded by very early-stage investors, such as accelerators, incubators or, if the team has an incredibly proven Founding team, some angel investors.
More often than not, serious investors will want to see some traction to prove the concept has legs.
What investors really want is some indication that this "idea" is better than any other idea, and the best way to separate it from the pack (and generate any real interest) is to try to show the idea has merit with traction.
Traction doesn't have to be crazy — but showing how we could get the product to a prototype stage or enlist a few early customers is what gets super early investors excited. They also like to see the hustle.
The best way for us to separate our ideas from the pack is to move on them.
Get some traction. This will significantly increase our funding options, and will also get the idea the attention it deserves!
How to establish traction. When you’re trying to convince the world that your idea has merit, the proof of your ability as an entrepreneur to be successful is in the traction you generate for your business. Here’s how to do it.
4 easy (but powerful!) startup idea validation techniques. When startups fail, it’s often because they built something that the market didn’t want. Don’t be like that. Validate your idea first.
Came up with a great business idea? What next? Do you have a million-dollar business idea but don’t know whether it’s worth investing time, money and effort? Here are 6 steps to help you proceed.
Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes Bizplan, Clarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.