10 Tips On Raising Capital For Your Startup
Raising capital is an important aspect of business finance or taking a startup forward. If you think you have enough money and don't need lenders, you would realize how wrong you are sooner after you launch your business. Capital is the primary ingredient for a business to flourish. Without the necessary finance, business startups would crumble. After having carried out proper market research, procuring necessary funding is completely up to you.
Preparation is vital to finding the right funding. You must examine the overall health of your business with the help of your accountant from different angles; research your competitors, market, and the industry; define your offerings; draft financial projections, and ascertain the number of funds you should raise.
Before you ask strangers to invest in your business, try getting your family or friends on-board. Obtaining funds from friends and family is a solid way to get your business rolling. If you cannot convince people around you to invest in your business, you'll have a hard time convincing professional investors.
Crowdfunding lets you pitch your business idea to regular people who are willing to support a cause or idea. If the crowdfunders buy your business idea, they would pledge to publicly support your business and donate funds.
Know Your Investor
Before you make your pitch to traditional investors, find out beforehand if the investor has the necessary funds for your startup and is inclined towards the industry your business is in. If an investor has always put their money in the medical industry and your business is into finance, you would waste your time and energy pitching to that investor.
Hone Your Pitching
If this is your first startup or you have never pitched for funding before, don't pitch to the top investors right away. Start with junk investors in front of whom you can afford to come across as amateurish. Once you are confident about your pitching skills, you may move up the ladder.
Investors view a lack of focus in a CEO as a major red flag. You should be able to communicate your business' goals and missions intelligently to the potential investor. Focus on the metrics you measure, with complete knowledge of the market.
Sell a Vision
During pitching, your objective should be to convince investors about the worthiness of your business and not how profitable it would become in a few years. When you talk numbers, your vision comes across as short-term.
There is no hard rule for following up with an investor, but it's recommended you contact the investor up to three times over a period of a few weeks. If communication is not your forte, make sure you have someone in your team who'll do that.
Resort to Relationship-Building
Relationship building and networking truly matter when you are trying to raise capital. A solid way to build relations is by adding potential investors to your newsletter. Even if investors do not respond, they would certainly take note of your progress.
Keep Connections Going
The venture capital space is limited. It's important to be in the good books of the investors as they are closely-knit and inter-connected. If you happen to burn a bridge with one investor, the news of which could spread like wildfire and you may end up with no investor wanting to do anything with you.