Raising Money for Your Startup is Hard Work. Here is What You Need to Know.
A few basic tips on how to raise funds for business.
The process of raising capital to start or grow a business is often overhyped in our current media-focused, trendy global society. Shows like ABC's Shark Tank and CNBC's The Profit make the whole process seem easy and at times glamorous even. There are many Entrepreneurs, some I have met, who seem more interested in going out to raise capital for their Startups than they are in actually building a viable business.
To these guys, the entrepreneurs, there is more of an emotional and expected financial payoff associated with the idea of raising millions of dollars for their young companies and sailing off into the sunset with their new found riches. And why would they not think so? Heck, all they see are instances of such fairy tales on television and in the magazines.
Thing is, once you actually start to go down the road of raising money for a business venture, you start to realize that the process is not as easy and straightforward as you may have seen on TV. It starts to become clear that, here, life is kicking art in the butt. I mean, let's be real, anyone who has ever actually raised money for a business venture will tell you that even among family and friends, soliciting investments is a rigorous task.
Building a business is hard work. I think we can all agree on that. Getting other folks to buy into your vision with their own money is just as hard, if not harder. There is the task of getting ready to get your story out to potential investors (which in itself involves hiring various consultants, preparing a slew of documents, etc.), getting enough investors to make monetary commitments, and continuing to deliver on your mission/vision.
Most investors, whether equity or debt, will require that the company, your company hit certain milestones in order to continue to receive funding. Any typical investor-to-Startup arrangement will not be a lump sum funding deal. As as an entrepreneur seeking funding, you must be prepared for these types of flexible propositions.
Know that if you are embarking on a series A or Angel round, you are far from getting rich. Don't get me wrong, you will be rich on paper, but any meaningful change to your actual network will occur after you have built a profitable business and engaged in a proper exit. One that clearly stipulates cash for you and your team.
Regardless of which avenue, and under which conditions you plan to raise money for your company. Whether you will approach friends and family, reach out to potential investors via Crowdfunding, or do some good old fashion walking and talking, you will need to nail down a few basic items/steps to give yourself a fighting chance.
I cannot stress this point enough. Hire a lawyer at the very least, one who has ample experience in helping young companies attract investors. Hiring an accountant, again, with relevant experience can't hurt either. Get yourself a team of pros to help you prepare the necessary documents ( Company financials and legal documents ) and to better communicate your plans for your firm. Some consultants can even introduce you to potential investors.
Pitch deck and presentation
When it comes to telling your company's story to investors, simple is always better. Keep your pitch deck between 10 to 20 slides. Here try to communicate in the most simple terms what your vision is, what end of the market you are looking to capture, who your ideal customer is, and if you have already made some progress in any of these areas. Also, be sure to talk about your team and what each key member brings to the table, and why these are the guys and gals that you believe can make things happen.
Be prepared for skepticism, especially if you are in uncharted territory or you have a contrarian approach to an existing space. Your ego should be able to handle some tough questions. Keep in mind that investors simply want to make money and any pushback is not personal.
Note: It is easier to bring on investors if you have traction.
List of leads
A lead list in this particular instance can be whatever you want it to be. This can be a list of friends and family members you believe have the means, appetite and are suitable for this kind of investment. You can also prepare a list of high net worth folks with whom you may have had some dealings in the past and you think might be into what you are offering. Be sure to prepare a list of truly qualified potential investors to help make the process a bit easier on yourself.