So you’ve started a new business. More than likely you are going to need to develop new skills to secure funds in order to get your business off the ground. To start, you might be the only person raising money. Raising capital for your small business might even mean you are asking your friends or family to become potential investors or even pitching a network of angel investors for a larger amount.
When you start to raise larger amounts of funding you may hire a broker or a third party to help facilitate the process of your company raising capital. You might be in a position where you are able to not focus on private investors, but look for venture capitalists to fund your business even further.
No matter the case, you as the business owner have to convince potential investors of two things. Firstly, that your business and good ideas are worth investing in, and secondly that you yourself are worth investing in. Here are a few questions to ask yourself and tips to keep in mind before you start the investment process.
Do you need help gaining investment or not?
When you are seeking finance, outside help can be pivotal to success, there are even individuals that do this for a living. This help can only get you so far. Smart investors invest in a company, you and your ability to communicate the value of the business. As well as, the opportunity the investment has for them, and your ability to efficiently utilize their investment to maximize the potential of your business long term.
Investors do their due diligence and look for unique offerings and business models, but also they look at whether or not they can trust their capital into people that have the skills to succeed.
Refining the skills that are needed to secure investor backing is a key skill for any entrepreneur. Your business plan can only take you so far and developing the basic fundraising skills are needed even if you’re using outside help. As you develop these skills, you’ll increase your knowledge, confidence, and sophistication in the process.
What is the way to give your company the best chance to close an investment opportunity?
There are a few different perspectives that can increase your chances to close an investment. Following them you can give you an opportunity to raise capital on your own terms.
Remember: you are always onstage.
Entrepreneurs are always onstage. This is especially true when it comes to potential investors. Every call, email, and meetings, formal and informal, is an opportunity for an investor to collect data on a potential investment. Evaluating you as a leader.
There will be no interaction off limits when it comes to them making their decision to provide capital. Micheal Dermer, Founder of The Lonely Entrepreneur loves to say this about being onstage:
When I was in New York City, I had a colleague that had been involved with a cancer charity. His mom died way too young from cancer. Long before becoming an entrepreneur, he was dedicated to raising money for the disease. When he started his company, despite his crazy schedule, he kept up his charity work. He later became a member of the board of a local cancer charity.
You would think that these are exactly the character traits you would want in a leader. I found out it wasn’t so obvious. One of his investors later told me during a dinner party, “It’s great he keeps up with the charity but it takes a lot of his time.”
The truth is that everything you do, no matter the time of day or the altruistic nature of what you are doing will be analyzed by potential investors. This doesn’t stop when you succeed in securing capital, venture capital firms will continue to monitor you to protect their investment.
Know your business plan and create an elevator pitch
Creating an elevator pitch, helps you to communicate the value of your business in a short amount of time, think the thirty seconds or a minute to ride somewhere in an elevator. Being clear, concise and passionate needs to show in everything you do. This should be something you do with everyone, but even more with investors.
You must be able to convey with a clear precision the valuation of your business. Also you need to be able to answer questions with concise answers. When you are asked about your business plan, keep the description brief and on point.
Investors who want to know more will ask the questions they need. Keeping it simple will help you stand out from the hundreds of other investments and avoid being passed by from not being able to grasp your business value.
In conclusion for this week, focus on the takeaways. Determine if you are going to have outside help or not, remember that you are always under the eyes of potential investors, and know your clear elevator pitch to hook potential investors. Time is money to both you and investors and you need to be ready.