There are a number of things every entrepreneur needs to do before he or she thinks about fundraising. The steps will vary depending on the start-up’s sector, location, etc.; but in general, the process leading up to getting investors looks like this.

Generate a great idea

Often, this starts with a personal frustration. The entrepreneur should identify what pain point exists for businesses or consumers, identify a solution, and think about how to turn that solution into a product or service.

Begin networking 

Once you have an idea and know what market you are in, begin networking and meeting as many potential partners and investors as you can in your market. This will not only help you later down the line with fundraising and finding customers, but it will also ensure you get a good understanding of the market, and what has or has not been tried before. The earlier you can begin making connections, the better. 

Build your team 

Every founder is great at some things, and not so great at others. For this reason, it is important to build the right team around the founder to develop the idea and the product. Choose someone who you know and trust as your co-founder, and try to find someone that complements your own skillset well.

Create an early version of your product 

While having a great idea is important, not every great idea turns into a great product. Feedback is your friend. Creating something for potential customers to try out early on is important to ensure you are listening to their needs, can pivot if needed, and do not spend too much time perfecting a product that nobody can use. The lean start-up methodology can be useful here.

Consider an accelerator / incubator program 

Different accelerators and incubators will demand various criteria in the start-ups they accept into their programmes, and they are not always a good fit for entrepreneurs. Often, however, they do provide access to networks and mentorship (and sometimes funding), which can be very useful to entrepreneurs. It is also a great signalling mechanism to investors, who often have a relationship with these programmes and expect higher-quality start-ups to emerge from them. Note that it is not critical to have gone through an accelerator/incubator programme for you to be a successful entrepreneur.

Gain traction 

While this will be different for every start-up, investors want to see a product or service being used. This can mean number of customers, number of users, page views, etc. If you cannot prove your product or service is being embraced by the market in some way, investors are unlikely to look very hard at your business.

Do your homework 

Before raising funding, it is important to ensure that you are ready for the upcoming process. This means agreeing on how much money to raise (a good financial model should help with this), preparing a good pitch deck, agreeing internally on the terms of the raise, and, most importantly, putting the key documentation for a fundraise in order. The documentation will vary but should include your incorporation documents, major contracts, audited financials, etc.

Raise funding for scaling

Once the problem solution fit has been figured out – your solution addresses a problem well and money for scaling is the only challenge – it is time to raise money from investors. Not every investor who wants to give you money is a good fit. Before you fundraise, make sure you research what kinds of companies investors fund, and what they can do to help your business.