On Demand Startup Fundraising: The Ultimate Guide

Updated On: March 2, 2023

Updated By: AppsRhino


According to the Harvard Business Reviews Report, The on-demand economy is attracting more than 22.4 million consumers annually and $57.6 billion in spending.

X Reasons why 2018 will be perfect time for an On Demand Startup

The advancement of technology has paved a way for fulfilling human demands online. Gone are those days when one has to visit shops to buy goods. Now, there is on demand app for almost everything. With the help of these apps, the pain to order food, to book an appointment is over. With just one tap, anyone can order a taxi, grocery, food, fuel and many more.

Giants like Uber, Lyft, Airbnb which created huge sensation have inspired many startups to try their luck in the On Demand app market.

Around 42% of adults (86.5 million) in the U.S. use On Demand apps.

The market has been swarming with a large number of Uber for 'X' companies (apps), and 2017 was definitely a rock-star year in this regard. This is because the year witnessed a steep rise in the number of Uber for 'X' start-ups, and the consumers’ appetite for such innovative services also increased. The on demand economy grew 58% in 2017, and participation in it increased by two-thirds (66%) since 2016. So it is quite easy to predict the trend of Uber for 'X' in coming time.

Reasons to start your Uber for 'X' venture in 2018

1. Mobile phone market has grown at a remarkable rate as compared to the previous five-year record. Therefore, the Mobile phone market has shown huge potential as the base of a viral trend of On demand apps.

-Around, 96% of Gen Z uses On demand apps.

-Around 125 million US population uses Smartphones.

-62% of smartphones purchase products/services through an app.

-E-Commerce dollars comprises of total 10% revenue.

Therefore, if you are planning to start your business venture at Uber for 'X' platform, taking care of some considerations, 2018 is the best time to start your journey.

2. The consumer appetite for On demand startups has shown a consistent rise and consumers are demanding more personalization and flexibility. In the US, it is estimated that the number of On demand consumers would shoot up to about 56 million by 2018 and about 93 million by 2022. This drift shows because consumers prefer to order product or service by using the on demand app, the propensity to pay cashless, real-time tracking, doorstep delivery, etc. These statistics simply shows the profitability index of Uber for 'X' in the coming future.

3. The venture capital funding in Uber for 'X' companies has likely to witness a sharp increase, as investors are more implicated to put their money in start-ups with a unique value proposition. If your start-up has a high potential for of growth and displays strong base and management, you are likely to make it big with the help of these venture capitalists.

4. Newer technologies are going to make their way into the market which would certainly create more room for innovation and help the existing and upcoming on demand platforms to strengthen their offerings and offer extra convenience to the consumers.

Things to consider before starting an On Demand Startup

1. The On demand app start-up market has already been occupied by a lot of players. And there is an unprecedented rise in Uber for 'X' companies. Therefore, before entering the market mark it important to confirm that your product/service is unique and solves a real problem. The services offered to consumers should be innovative that means service should be different from the other competitors.

2. While building your Uber for 'X' platform, make sure that you do not completely replicate the business model of other players existing in the on demand platform. While it is important to study the business models of others and learn from their stories, it is equally important to gain abundant market research, customer's feedbacks, surveys, etc. Study your customer segment and design your niche.

Depending upon your domain, taking care of all precautions, go-ahead and make your name in Uber for 'X' platform. Therefore, it is important to adopt the right approach to capture the opportunity.

2018 will definitely give you success! Well now it’s time to think about How to raise funds for your on demand startup.

How to raise funds for your on demand startup

The on demand economy has been catching headlines ever since it came into existence. According to Harvard Business Reports, on demand companies attract nearly 22.4 million customers annually, and the number is expected to only grow with time. Now more than 250 estimated companies are providing on demand services across 16 industries, up from 76 companies across 6 industries in 2014. The tremendous value and services that it offers to the consumers is something which has been driving the growth of this concept into every industry and has therefore been inviting a lot of investor interest.

Washe, a Boca Raton city of Florida based on demand car wash Company, has recently raised $3.5 million in seed funding in order to grow their business in $3 billion mobile car wash industry in the U.S. Another on demand platform, this time for walking and dog care services, Wag, has bagged an investment of $300 million from Soft Bank vision fund. The startup has its presence across more than 100 cities in the U.S. itself. We've been listening to the success stories of Postmates and Doordash but here comes a new player in the market, MealPal, an on demand food business in Australia, who recently gobbled $20 million in series B funding led by Menlo Ventures. The startup got this funding to grow in the markets of the U.K. the U.S, Canada and most likely in France as well.

1. Get introduced to the VCs or Angels well before you start the funding process. Establish a relationship well before you present your business idea to them. There are a number of websites out there that help you get in touch with the large investor community. Other than these, even the founders of some renowned start-ups keep investing in new ventures quite often. Go out and get connected to them, develop relationships, and it might work wonders for you!

2. It is advisable to get introduced to the investors through a trusted source or a good referral, which could help you establish your credibility in the first place only. Investors would take you seriously if you approach them via some strong source. Well, that’s the preferred route which could set your ground for some real action.

3. Identify the various events and industry forums where investors would be present. This can be a great opportunity for you to establish contacts, exchange ideas and develop relationships. If possible, try to take the stage and speak about an interesting trend or unique ideas, which could draw their attention towards you. Let your thoughts reach the investor community. You never know, it might ignite a spark!

4. Make sure that you create a great first impression in the first round of meeting with the investors. Sound creative and promising with your ideas and strike intelligent, impactful conversations. This could actually pave the way for your on demand startup.

5. Actively use social media to bounce off your creativity and value proposition to the investors. Social media is the most important medium nowadays to stay connected with anyone and everyone. Therefore, use it to your best and keep sharing exciting posts that could actually tickle their brains. You could consider writing an exciting blog post, which highlights a unique aspect.

Well, if you follow the above, we hope that you get to capture some of the investor interest. But the ball swings back again to your court. There are a large number of investors out there but it’s a tough job to identify those right ones who would invest in your business, and at the same time, add value and help it grow.

A few things to consider while choosing the right investors for your venture

Check the market reputation of the venture capitalists

Do a thorough check on the credentials of investors; find out if they have enough expertise, experience, etc. that your business requires. It is always beneficial to partner with someone who has already earned a name for itself in the industry.

Similar line of product or service

Identify investors which are focusing on your company’s sector or related products and services. By doing this, you could be assured that they would understand your business in a much better way. Also, this might increase the chances of your funding.

Personal equation

Before you decide on your investing partner, be sure that you are comfortable in their company. See if you could strike conversations and develop friendly terms. Do your attitude, personality, and style of working a match with each other? Though it sounds like a very basic requirement, in the ideal scenario, this works best as one is able to pull it off better if the partner/ investor is like-minded.

Similar goals and vision

Do these investors possess similar goals and thought process as yours? Do they yearn to achieve the same targets as you do? Are you well aligned with their approach? Find answers to these questions before you decide to begin the investment journey for your on demand startup.

Find an investor who could add real value

Undoubtedly, your main aim is to look for an investor who has got substantial money to fund your business. But will that investor also be able to support your future growth – that’s the real question. Ideally, the right investor would study your business idea carefully and would make you think differently about it. They would provide valuable insights at each step and make sure that you do not commit mistakes. In short, the right investor would shower you with the right knowledge and wisdom and show you the right path to success.

Ok, so once you have identified and selected the right investor for your company, be sure about the amount of capital you need to raise to support your activities. Study your short-term and long-term goal clearly – whether you are aiming at expansion in different cities or countries, building a strong team, introducing superior technology, etc.

Well, finally you ought to prepare a powerful pitch and presentation, which could actually help you secure the required funding. Even with great strategies of fundraising, one has to be prepared to get turned down by various investors. They may not pay heed to your ideas and that could be because of certain mistakes which an entrepreneur needs to avoid.

Remember, raising capital for your business is one of the most crucial steps in your entire business journey. Stay alert and stay intelligent!

10 mistakes to avoid through your business journey

As the introduction of Uber sent revolutionary ripples around the world and the on demand economy immediately rose. Millions of start-ups promising instant delivery of goods and services began to surface up and started to flood the newly-found industry. Uber was the one which heralded the rise of the on demand era, while others flipped the pages of the ride-hailing giant’s success story before they could write their own. However, unfortunately, only a few of the players emerged successful, while others struggled to make a mark due to various weaknesses in their approach.

Below are few of the mistakes that a on demand startup and big companies need to avoid throughout their business journey

Not understanding the customer needs

Many companies lose track of their customer's expectations, their offerings are often not aligned with them and the product eventually reaches a point of stagnancy. For example, in the laundry business, if a customer is expecting same day delivery with real-time tracking system while on the other side the service provider is unable to provide his services within a stipulated time then a customer may feel disappointed and perhaps he may not deal with the same business again. A line of advice here – stay connected with your customers, reach into their mindsets at each stage of your business, keep digging into their preferences from time to time and fuel innovation whenever required. AppsRhino helps an entrepreneur to fulfill his customer's requirements with simplified business solutions which builds customer relationship management.

Not doing competitive analysis

Are you regularly keeping track of what the other on demand players in the market up to? If not, then you have trouble waiting for you ahead. We are living in a modern, innovative and extensive competitive environment, where the power of technology is being harnessed each moment and newer, unique products are continually introduced in the market from time to time. On demand startups are on their toes constantly to strengthen their offerings tactics to keep up the excitement levels of the consumer. Nokia, a Finnish MNC, faced failure by not keeping an eye on its competitors. Nokia, while working on Symbian series partnered with Microsoft and launched its smartphones after two years. On the other hand, Apple launched its iPhone and shown the world what a smartphone really is. Android also, at that time, have had penetrated into the market and started gaining momentum. Thus, it's extremely important for each player in the industry to have a close watch on the strategy of other players and ensure that you are ahead in the race.

Not having a distinct competitive advantage

Throughout your business journey, make sure that your product stands out from the competition. The on demand economy has been experiencing a clutter, and without a unique value proposition, your brand might not get noticed in the market. For example, if an application is providing simplified payment methods, both online and offline, it distinguishes them from other players in the market. Therefore, make efforts to set yourself apart from the competition and adopt a suitable marketing strategy to convey your USP to the market.

Lack of market research on other on demand startups

Many on demand startups, in a rush to join the wagon, make certain quick assumptions about the market and give a miss to various tactics like market segmentation, targeting and positioning, surveys, meeting targeted customers, understanding their needs, questions, concerns, etc. These are the players who often face a serious setback. Therefore, it is advisable to master the domain that you are targeting and base your moves on clear-cut market research. Uber is working on air-taxi technology and it will deliver food by drones in San Diego, California(US) and FedEx will also use drones to delivering packages between the airport and other Memphis locations.

Ignoring the power and potential of social media

Social media platform has fast-paced the growth of many businesses. To reach masses, brands have their own pages on social media platforms like Facebook, Instagram, and Twitter. Brands reach out to the masses through social media platforms which gives more product knowledge and creates brand awareness. According to a survey, 92% of buying decisions are influenced by Social media. Now, the consumer possesses full control over social media and expects that their concerns are addressed speedily. However, if companies ignore customers reviews and feedbacks then they are set to knock out of the competition.

Inaccurate pricing

Many aspiring on demand startups have failed in the past due to their inaccurate pricing models. Either their products have been priced too high, which the consumers hesitate to buy, or they are priced too low, hitting the margin levels of the brands. Therefore, you need to analyze carefully consumer behavior, the demand and supply forces, comp-set pricing and can avoid a hitch in your journey.

Inadequate inventory management

Many start-ups in the industry fail due to inaccurate inventory planning. Too little inventory leads to losing sales and customers, while excessive inventory affects profitability. The maintenance and management costs of inventories are high, which include a store to keep them and manpower to supervise them. So, more funds are required in buying or renting pre-inventory. Hence, the advice here is to maintain an optimum inventory level.

Narrow approach for customer acquisition

Do not depend on a single channel to acquire customers. Focus on creating multiple acquisition channels like SEO, SEM, Content Marketing, Viral Marketing, Email Marketing etc. and eventually, stick to those which give you maximum results. Digital media, email marketing, mobile app marketing, discounts, and promotions, are only a few of the methods which have successfully worked in building strong consumer bases of many on demand startups.

Loose delivery network

The on demand industry has been thriving on the fundamental principle of instant deliveries to consumers, which is only possible if you have a strong delivery fleet in existence. This factor also depends on the business solutions provided by the technical partner. Technical glitches between merchant's and driver's version of the app and networking issues in fleet management can result into a serious trouble. A strong fleet management avoids communication gap and makes a business success. Make sure that you deliver your services at the promised time, as delayed deliveries will be daunting to your brand.

Raising too much money too soon

Founders of many on demand startups are often lured by the idea of raising huge money from the market at the early stages just to fulfill their hiring resources, deploying latest technology, entering newer markets, etc. Sometimes they lack proper vision, budget, and market analysis. These loopholes burn deep holes in their pockets. Also, investor's pressure increases with the increase in fund supply. The high expectations from the company are thus not scalable with the market growth. A Limited amount of money in earlier stages may bring some new challenges to a business to bring the best out of them. The same challenges motivate innovative minds of the entrepreneurs as necessity is the mother of invention and not the money.

Remember, having a careful and detailed strategy in place would help you earn a name for yourself in the budding on demand world.

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