Guide

The startup's field guide for getting funding

Entrepreneur business plan funding.
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Trying to get funding for your big idea can be daunting, but it doesn't have to be.

If you're launching your own business, the money is out there, and there are a number of steps you can take to increase your chances of locking it down.

In the U.S. last year, early-stage venture-capital deals secured $27.3 billion in investment, according to a report by CB Insights. While overall U.S. venture capital deals saw funding dip in the fourth quarter to the lowest level since 2011, there's still money to be made. It's all about knowing how to get it.

1. Write an email

When Kenneth Loi and Amer Justice of the start-up Procurify needed finance, they did something that most entrepreneurs discount out of hand: They wrote an email ... to top investor Mark Cuban.

"Cuban was on our dream list of investors," Justice told CNBC in a 2014 interview. "Emailing him was a combination of both intuition and having nothing to lose."

To their surprise, the businessman, who owns the Dallas Mavericks basketball team, replied the next day, saying he wanted to hear more about Procurify, a cloud-based procurement system.

Several months and hundreds of emails later, Cuban invested nearly $500,000 in the business.

"To any fellow entrepreneurs out there, I would recommend to always try and do things outside the box," Loi added. "The worst that can happen is a 'no.' "

2. Make sure your business is fundable

Asking this question is absolutely key, according to Tanya Prive, co-founder and CEO of OneVest, a start-up ecosystem that supports entrepreneurs and investors from company formation to financing.

Firstly, the market size needs to be attractive enough to provide good returns for an investor, she said.

"Even if you have 1 percent of market — and the market is only $50 million — for investors, that's a very small piece of the pie," Prive said in a 2014 interview.

Start-ups should also have identified substantial traction, which can be identified in a variety of ways, such as month-on-month growth or online sign-ups, she added.

"What matters for me is the size of the market opportunity and the unique technology," said investor Jonathan Ebinger, partner at venture capital firm BlueRun Ventures, in a 2014 interview. "These things have to come across in that first meeting."

3. Stay positive and project passion

In addition, Ebinger said the "strength and fortitude" of the management team was one of the key things he looked for in start-ups. "You're betting on a team of entrepreneurs," he told CNBC. "They have to be good."

And when it comes to meetings, a positive attitude is crucial.

"If you're not met with that level of enthusiasm, it makes the decision a whole lot easier," Ebinger added.

Simon Cook, CEO of European venture capital firm Draper Esprit, agreed that passion was a make-or-break quality.

"A passionate belief in what they're doing is No. 1 for us. Because if you can find that passion, you can build a business around it," he told CNBC in 2014.

4. Follow up with data

Entrepreneurs have a "huge misconception" that investors are going to invest straight away, according to Prive, but "that hardly ever happens."

"Instead, what your job as the founder is to provide consistent data points which would help the investor plot out a growing graph of traction, growth — your ultimate success," she said.

"When you follow up, it's important you follow up with meaningful information."

Procurify's Justice said "tangible projections and tangible results" were the key to securing Cuban's investment and is what kept him interested over months of communication.

"Providing that data was the single most important thing we did in terms of raising investment," he said.

5. Avoid bluffing in pitches

And as tempting as it might be, bluffing is a no-no when it comes to pitching, the experts warned.

"In my experience, bluffing never works," Procurify's Sandhu added. "You should never break trust with an investor — you talk to them every week; you get to know their family. It's like a friendship, and they need to trust you completely."

Investor Ebinger agreed. "You're going to work together with these people weekly, sometimes daily, potentially for years," he said. "You don't need to be friends. But you need to have a high level of respect for each other."

But there's a fine line when it comes to bluffing, according to Prive, with a lot of entrepreneurs exaggerating about progress — but then working hard to deliver.

"Some level of bluffing is helpful as long as you really put your money where your mouth is and deliver on those things," she said. "But the start-up and investment space is a very small world — and reputation is everything."