11/10/2014 12:09 pm ET Updated Dec 06, 2017

5 Questions to Ask Before Seeking Startup Funding


Before you start looking for ways to fund your startup, make sure you can answer these questions.

Funding is one of the biggest concerns of new entrepreneurs. Determining how much you need, securing the capital, and following up with your investors are all stressful steps in the entrepreneur's journey, but before you even think about sourcing your startup capital, you need to make sure you can answer these five questions:

1. Why is your idea going to be successful? You need to know the answer to this question, backed with research and objective data. When you shop your idea around to investors, they don't want to hear "this is the greatest thing ever!" They want to hear real projections.

2. How much money do you need? Do the research ahead of time. Figure out exactly what you need to get the ball running -- eliminate everything that isn't absolutely necessary, and cut your business down to the minimum viable product. Then, determine exactly how much money you need to cover those costs. If you don't know, it's time to do some more research.

3. When will you start making money? You should be able to realistically project the turning point, at which your business will start getting a stable stream of revenue. Be conservative and realistic with this projection, and base it on actual data -- not wishful thinking.

4. Why would someone invest? How are you going to incentivize your investors? Are they getting partial ownership of your company? Sample products as a crowdfunder? Will they be involved with any major decision making?

5. Can you handle the financial planning? This is also important. If you don't feel confident in your abilities to keep track of all the major finances of your company, you need to hire an accountant or a fiscal consultant.

If you can answer these questions specifically, and without a sweat, then it's time to start seeking funding. Angel investors, potential partners, and crowdfunding are all great options, but it's up to you which one will work best for your business.

Jose Vasquez is a serial entrepreneur and tech enthusiast dedicated to helping startup technology companies get the direction and momentum they need to succeed. As the founder of Build. Brand. Blast., Jose has established a collective resource for tech entrepreneurs to consult when brainstorming, creating, launching, or expanding a new business. Jose is also the founder and CEO of Quez Media Marketing, a marketing firm that combines technology and creativity to help new and growing companies get the results they need.

Jose graduated from Goldman Sachs' 10,000 Small Businesses program. Goldman Sachs is a partner of the What Is Working: Small Businesses section.

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