Early-stage startups need to develop a financial strategy to obtain funding, for example increasing traction and earning revenue.
Heaptalk, Jakarta — Capital is often a stumbling block when building a startup. Therefore, founders must think carefully about their funding strategy from the start of the startup. In a discussion at the 1000 Startup Digital event, Head of Merchant Partnership and Brand Strategy GoTo Financial Putri Rusli and Head of Online Payments Strategy MidTrans Dea Deviana provided several essential points in developing a funding strategy for early-stage startups.
Increasing traction and earning revenue
Bootstrapping or a funding system that relies on the founder’s internal strength is generally carried out by startups that are in their early stages. At this stage, startups cannot generate revenue since they are still gathering and realizing ideas, or called the ideation stage.
After ideation is accomplished, traction will appear and increase. This indicates potential users who need to be explored more deeply. Fresh funding can be obtained at the seed stage, particularly when traction is felt to be ‘adequate enough’ and the startup has received revenue.
If startups are still in the ideation stage, the teams have to discover a strategy to increase traction and earn revenue to obtain seed funding. From seed funding, startups can level up to series A, B, and C funding. This can happen if the companies show significant growth in terms of revenue, users, and other measurements to prove their business model is valid.
Recording cash flow and revenue projections
Aligned with the efforts of the founders to boost growth, startups must implement healthy corporate financial behavior in a routine and disciplined manner. For example, by recording cash flow and projected revenue to achieve the expected growth targets.
In addition, startups need to establish good communication with financial partners who carry out similar visions and missions. That way, when the time comes for funding, startups can work with financial partners and achieve their financial goals.
The right time to prepare a financial strategy
When is the right time for startups to prepare a financial strategy? The answer is as soon as possible. Even when a startup still has an ‘idea’, the founder has to start thinking about the startup’s financial management.
Certainly, the founder wants to have a sustainable business, not depend on the existence of the founder or financial support from outsiders. A business with a bright idea that can solve user problems is not enough. The founder needs to figure out the best way to keep the financial wheel turning, making the business grow.
Providing a pleasant user experience
Discovering interesting ideas and being able to solve user problems are factors that can attract investors. Besides, investors also consider ‘How to solve the problem? Is the way hard or easy? Or in other words, what kind of user experience do we want to provide users?’
Hence, when it comes to the payment stage, startups must provide a pleasant experience for users. The transaction process should not be complicated and difficult to make users keep harnessing the product. Most importantly, investors will definitely seek returns from any funds disbursed to startups. Therefore, early-stage startups should demonstrate growth potential based on relevant data to be eligible for funding.
