There is a lot that comes with establishing a startup and it is safe to say that in all aspects and processes of it, none of it is easy. From thinking about ideas, developing the thoughts and ideas to implementing them to become physical and tangible, establishing a startup is hard.

Like in a previous piece, it is easy to confuse startups with small businesses, but just to circle back, one of the differences between the two is the way funds are raised for both startups and small businesses. Where small businesses rely heavily on loans, startup founders depend heavily on investments and in some cases, grants, to take their business to the next level.

Every startup founder experienced at some point, difficulty in getting investment. But for the first-time founder with little or no experience, it can be an overwhelming task to get even the first round of investment and even navigate around the VC market space. 

This piece is to provide information for first-time founders looking to venture into the VC space looking for rounds of investment or just looking for other options to raise funds.

READ ALSO - Startups vs Small Businesses - What's The Difference?

In an earlier piece, we spoke to an investment analyst on how VC Firms evaluate startups and Founders in Africa and that can be a very useful resource in understanding how investors analyse your pitch deck as a founder looking to raise funds.

Raising Funds as a First-Time Founder

It is important to note that the fundraising process largely depends on what startup funding stage a founder is at. But since we are targeting first-time founders, we assume that you are looking to raise your first round of funding which usually comes up a few months after operation commences.

So Here’s Everything You (Don't) Want to Know About Raising Funds

Raising Money is Expensive

The need to raise funds can be a frustrating and expensive journey - especially for first-time founders. The need for money leads to gross efforts like the time and creative energy required to get the cash from investors - This is perhaps the least talked about and least appreciated aspect of raising money.

As a first-time founder, you may have to drop nearly everything else you are working on to find potential money sources and tell their story of giving you funds.

This process is very stressful and can drag on for months as the potential investors begin “due diligence” examinations of you as a founder and your business or proposed business idea. Getting an answer can take up to a year or six months. In all of that, there is th emotional and physical unrest that will come to you as a first-time founder looking to raise funds.

Your Privacy is Gone

Convincing an investor takes a good sales job, good pitch deck with lots of snap details and information. However, that also comes with you leaving nothing about your business untouched. You must be prepared to tell 5, 10, or even 50 different people whether your product chiefly depends on one software engineer or technician or what management’s capabilities and shortcomings are present in your business. You must be ready to tell how much of the company is yours, how you get compensated, and what your marketing and competitive strategies are. Also, be ready to hand over your personal and corporate financial statements.

Making such guarded information open makes the founder uneasy but it’s a thing you must be prepared for, understanding the need for it to be done. 

READ ALSO - How VC's Evaluate Startup and Founders in Africa

And where there may be venture confidentiality between the founder and the potential investor(s), information sometimes leaks inadvertently—and with destructive consequences.

Experts Can Still Blow It

Making decisions about how much money to raise can be a very tricky moment for startup entrepreneurs. Decisions like from what sources should the founder target, should funds be raised in debt or equity, and under what terms should fund be raised? 

These decisions when made wrongly can cripple a growing business. However, founders are also quick to authorise their fund-raising strategies to financial advisers. And unfortunately, not all advisers are skilled and not all predictions become positive in the end. And of course, it is the entrepreneur—not the ‘financial expert’—who must live or die by the consequences. So you might want to think critically about it before hiring external experts.

Money is Not Always The Same

Where money drives your fund-raising effort, it is not the only thing potential investors would bring to the table. And most first-time founders make the mistake of overlooking other offers that are not money. If you overlook offers such as whether the associate has experience in the industry, contacts with potential investors or customers, and a good reputation, you may just be shortchanging yourself.

The Search Never Ends

One thing about startups and raising funds is that after months of hard work and rough negotiations, fund hungry and untiring entrepreneurs are quick to conclude that the deal is closed with the handshake and letter-of-intent or executed-terms sheet. They relax the street-wise warning they have exercised so far and cut off discussions with alternative sources of funds. This can be a very big mistake.

You should keep all options open and not just all options, options that fit your company brand.

That said, first-time founders need to remember that no deal is perfect and since even the savviest entrepreneurs are at a disadvantage in negotiating with people who strike deals for a living, there is a strong incentive for first-time founders to learn as much as they can about the process—including the very things they are probably least interested in knowing.