How To Raise Venture Capital With Social Media

How To Raise Venture Capital With Social Media

"Shark Tank" and its Japanese equivalent,"Dragon's Den," are reality TV shows, where startup entrepreneurs pitch their business ideas to a panel of investors, expecting to have the funds they need to proceed.

The practice of getting on those displays is not fully disclosed, but we can say that just a small minority of startups make it. And then, many boomers have been turned down.

There are also organizations that hold yearly events, throughout which startups can throw their companies to potential investors. Again, getting on the docket for these events is time intensive and costly.

So, how does a startup find the financing it wants?

Startup Funding Alternatives

Traditionally, entrepreneurs who have good business ideas (goods or services) have experienced just a few possibilities for raising funds:

1. They have a quantity of money out of their own assets and plan a"lean startup" using what cash reserves they've.

2. They could tap into friends and relatives looking for a variety of methods to commit their funds.

3. They can develop a business strategy and toss it into conventional financial institutions in hope of obtaining a loan.

4. They could attempt to connect to venture capitalists (person or firms) that might be considering funding their jobs.

However, based on CoinMetro CEO, Kevin Murcko, things have shifted in the funding world thanks to innovative new tech like blockchain, cryptocurrency and social websites. Now there is crowdfunding and peer-reviewed lending, driven by social media platforms -- areas where startups and potential investors can"meet and greet"

The rising role of Social Networking in startup funding

Social networking can relieve a few of the challenges of classic funding. As per another research conducted by Wharton School of Business, in fact, social media actions and the capability to acquire financing are positively associated. And here's how:

  • Social networking enables startups to broadcast details about themselves into a wide audience.
  • Since startups obtain followers, their activities can draw the interest of angel investors that are searching for opportunities, but who often lack the organizational structure to explore them.
  • According to the analysis, 60 percent of startups utilize Twitter to spread awareness; 47% use Facebook, and 36% use LinkedIn.

The Wharton study concentrated especially on the way startups leverage Twitter and their success rate at obtaining angel investment funding consequently. The variables taken into account contained the following:

  1. The number of tweets posted by every startup by display name that included a URL to the startup.
  2. Mentions: the variety of different posts that say that the startup's display name within a month's period.
  3. The number of views of a startup's Tweets at a month's period.
  4. The number of Tweets about a screen name which includes a positive sentiment about the corporation.
  5. The number of followers for every screen name in the study.

The dependent variable in this research was obviously the success in raising the capital. Obtaining the analysis results will show numerous tables and charts that talk to this correlation between Twitter existence, following, cites, etc. and the success of financing objectives.

How exactly social media influences financing rounds

Based upon a statistical evaluation of the data, the researchers arrived at the following decisions:

Social networking presences/activities do really influence capability to find and close far better financing rounds. There are some important caveats though:

  • Simply being current on Twitter doesn't automatically guarantee greater funds for a startup.
  • The number of tweets shared by startups does not significantly alter the funding results. Actually, being overly busy can actually hurt your enterprise - posting over 580 tweets annually might actually damage your company.

Social media presences do promote a more positive brand image, draw larger after and get more followers to retweet the startup's messages. Every one of these things attracts a larger pool of investors who are looking for opportunities. As an example, the researchers estimated that a one standard deviation increase in the Twitter Influence measure lead to an additional $1.5 million in 2nd round financing for investigated startups. That was the equal of the following:

  • The increase in the number of cites by 4.6 percent;
  • The increase in the number of impressions from 12.0 percent;
  • The increase in the number of followers from 209,815;
  • The increase in the average sentiment score in people's tweets mentions of this startup firm by 0.02 (with all negative sentiment as -1 and all positive opinion as 1.

Startups that are dedicated to their social networking activities get a bigger pool of investors in addition to more total investment funds.

Start-ups must take care of…

As a startup founder or an entrepreneur, then getting the funding you want to run and grow your business might be the trick to achieving your dreams, based on Alex Dee, Cofounder of The 8 Discover Fantasy Lifestyle. But, startup funding has gone beyond the standard channels. Startups and prospective investors must find each other via non-traditional venues, and these comprise social networking platforms.

While the study that produced these results focused solely on Twitter, entrepreneurs must select the correct stations for themselves where they have the most followers or possible for followers and with which they are comfortable.

Another suggestion? Create a special hashtag for articles on all platforms you are using. You may then arrange all your posts into one topic page, and folks are going to have the ability to find them and learn about your funding campaigns. And ask your followers to use that hashtag too. This results in simpler discovery and increased awareness for the brand.

Interact with your audience via engaging articles and through providing updates on your financing advancement. And don't forget to publicly thank investors (unless they desire to stay anonymous).

Pitch into journalists. Twitter is maybe the very best venue for this. It's widely employed by journalists to find leads for their stories. Get to know the journalists Twitter and also their unique needs for pitching stories. Adhere to people who really are a good'fit" for the startup and produce a relationship before pitching.

The most important thing? The more effective you're in using social networking to market your startup, the more you will obtain the attention of investors.