International startup funding: 5 steps to raise funds

If you have a great idea for a startup, you might be wondering how to raise funds to turn it into a reality. Raising funds is one of the most challenging and crucial aspects of launching a new venture, especially if you are based outside the U.S., where most of the venture capital is concentrated. However, there are many ways to secure funding for your startup, both from local and international sources. Here are five steps to help you raise funds for your international startup.

1. Validate your idea and market

Before you approach any potential investors, you need to validate your idea and market. This means that you have to prove that there is a real problem that your solution can solve, and that there is a large enough market for your product or service. You can do this by conducting market research, surveys, interviews, and testing your minimum viable product (MVP) with early adopters. You also need to have a clear value proposition, a competitive advantage, and a scalable business model.
For example, Airbnb validated their idea by renting out air mattresses in their own apartment during a conference, and by interviewing potential hosts and guests. They also conducted market research to estimate the size and growth of the travel industry, and to identify their target segments and competitors. They then refined their value proposition as a platform that connects travelers with unique and affordable accommodations around the world.

2. Choose the right type of funding

There are many types of funding available for startups, each with its own advantages and disadvantages. Some of the most common types are:
  • Self-funding: This is when you use your own savings, income, or assets to fund your startup. This can be a good option if you have enough resources and want to retain full control and ownership of your business. However, it can also be risky and limit your growth potential.
  • Crowdfunding: This is when you raise funds from a large number of people, usually through an online platform. This can be a good option if you have a strong community, a compelling story, and a product that appeals to a wide audience. However, it can also be time-consuming, competitive, and require you to deliver rewards or equity to your backers.
  • Loans: This is when you borrow money from a bank, a government agency, or a private lender. This can be a good option if you have a solid business plan, a good credit score, and a steady cash flow. However, it can also be costly, risky, and require you to repay the principal and interest.
  • Grants: This is when you receive money from a government, a foundation, or a corporation, usually for a specific purpose or project. This can be a good option if you have a social or environmental impact, a novel or innovative idea, and a clear budget and timeline. However, it can also be competitive, restrictive, and require you to report your progress and outcomes.
  • Private equity firms: This is when you sell a portion of your equity to a private equity firm, which usually provides capital and expertise to help you grow your business. This can be a good option if you have a proven track record, a large market opportunity, and a high growth potential. However, it can also be expensive, dilutive, and require you to give up some control and alignment with your investors.
You should choose the type of funding that suits your needs and goals, and that matches your stage of development. For example, self-funding or crowdfunding might be more suitable for early-stage startups that are still validating their idea and market, while loans or grants might be more suitable for startups that have a clear business plan and a positive cash flow. Private equity firms might be more suitable for startups that have achieved product-market fit and are ready to scale up.

3. Prepare your pitch deck and financials

Once you have chosen the type of funding that suits your needs and goals, you need to prepare your pitch deck and finances. Your pitch deck is a presentation that summarizes your business idea, your team, your market, your traction, your vision, and your ask. Your financials are a set of documents that show your current and projected revenue, expenses, cash flow, and valuation. You need to make sure that your pitch deck and financials are clear, concise, and compelling, and that they highlight your unique value proposition and competitive edge.

Your pitch deck should include the following slides:
  • Cover: This should include your company name, logo, tagline, and contact information.
  • Problem: This should describe the problem that you are solving, and why it is important and urgent.
  • Solution: This should describe your product or service, and how it solves the problem.
  • Market: This should describe the size and growth of your target market, and your customer segments and personas.
  • Competition: This should describe your main competitors, and your strengths and weaknesses compared to them.
  • Traction: This should show your key metrics and achievements, such as users, customers, revenue, growth, retention, etc.
  • Team: This should introduce your core team members, their roles and backgrounds, and their relevant skills and experiences.
  • Vision: This should describe your long-term goals and aspirations, and your impact and value proposition.
  • Ask: This should state how much money you are raising, what you will use it for, and what terms and conditions you are offering.
Your financials should include the following documents:
  • Income statement: This should show your revenue and expenses, and your profit or loss, for a given period of time, such as a month, a quarter, or a year.
  • Balance sheet: This should show your assets, liabilities, and equity, and your net worth, at a given point in time, such as the end of a month, a quarter, or a year.
  • Cash flow statement: This should show your cash inflows and outflows, and your net cash flow, for a given period of time, such as a month, a quarter, or a year.
  • Financial projections: This should show your expected revenue, expenses, cash flow, and valuation, for the next three to five years, based on your assumptions and scenarios.

4. Research and network with potential investors

The next step is to research and network with potential investors who are interested in your industry, stage, and geography. You can use online platforms, databases, directories, and events to find and connect with investors who match your criteria. You can also leverage your personal and professional network, such as your mentors, advisors, peers, customers, and partners, to get introductions and referrals to investors. You need to build trust and rapport with your potential investors, and show them that you are passionate, knowledgeable, and committed to your startup.

Some of the online platforms, databases, directories, and events that you can use to find and connect with investors are:

  • AngelList: This is a platform that connects startups with angel investors, venture capitalists, and job seekers. You can create a profile for your startup, browse and apply to investors, and join syndicates and funds.
  • Crunchbase: This is a database that provides information on startups, investors, and funding rounds. You can search and filter by industry, stage, location, and other criteria, and access insights and trends.
  • PitchBook: This is a directory that provides data and analysis on private and public companies, investors, and deals. You can access detailed profiles, valuations, and transactions, and generate reports and charts.
  • Startup Grind: This is a global community that hosts events and programs for entrepreneurs and startups. You can attend local and online events, network with peers and investors, and access resources and opportunities.

5. Negotiate and close the deal

The final step is to negotiate and close the deal with your chosen investor. You need to be prepared to discuss and agree on the terms and conditions of the investment, such as the amount, the valuation, the equity, the milestones, the rights, and the obligations. You also need to be ready to handle due diligence, legal documents, and contracts. You need to be confident, realistic, and flexible, and aim for a win-win situation that benefits both you and your investor.

Some of the terms and conditions that you need to negotiate and agree on are:

  • Pre-money valuation: This is the value of your startup before the investment, based on your revenue, growth, traction, market, and potential.
  • Post-money valuation: This is the value of your startup after the investment, calculated by adding the amount of the investment to the pre-money valuation.
  • Equity: This is the percentage of ownership that the investor will receive in exchange for the investment, calculated by dividing the amount of the investment by the post-money valuation.
  • Dilution: This is the reduction of your ownership percentage as a result of issuing new shares to the investor or other parties, such as employees or co-founders.
  • Milestones: These are the specific goals and objectives that you need to achieve in order to receive the investment, or to unlock further funding from the investor.
  • Rights: These are the privileges and benefits that the investor will have as a shareholder, such as voting rights, board seats, information rights, anti-dilution rights, liquidation preferences, etc.
  • Obligations: These are the duties and responsibilities that you will have as a founder, such as reporting, governance, compliance, etc.

We are always on the lookout for new opportunities to partner with talented and passionate entrepreneurs who have a vision to change the world. If you have a great idea that needs funding and support to grow, we invite you to apply to join our community and programs. Whether you are looking for seed funding, Series A, or beyond, we have the right solution for you.