I know how exciting the moment is when you suddenly come up with a new business idea and decide to turn that idea into reality. Very rarely do we realize that the path is going to be really challenging, especially when you have to raise fund for your startup. Often entrepreneurs either get bored or lose hope and motivation after several rounds of failure. Make sure you are not one of them.
It’s praiseworthy that you have decided to establish your own business. It’s OK if you fail at the first few rounds; no need to lose hope and trust me, this is one of the most important tips for Capital Raising that I would like to give you.
Moving to the other tips for capital raising, you have to take care of certain things that will strongly determine your success in fund raising. Firstly, you should know your ultimate goal. What you want, how much you want, how will utilize the fund, what you are trying to achieve in the near future and such other questions.
Often entrepreneurs are concerned about their ownership in the company. Now if you are planning a business which is aimed at “for the people” and “by the people”, then you may not remain the sole owner of the company. On the other hand, if you want a simple investor-backed company where you are the sole owner, then the situation is different. So have to know what you want at the end of the day.
Your next aim should be to approach your customers before you approach the investors. Customer validation is very essential as it indicates how efficiently your business will run. Now, it doesn’t really make sense to include your friends and family in it as their reviews and comments will be to some extent biased since they love and care for you so won’t be very harsh.
To know the exact reality, you have to catch your potential customers in the market and show them a prototype. You have to do this with as little resources as possible. Try to meet at least 20 -40 potential customers and there is no better validation than getting a Letter of Intent signed by the customers themselves. If that’s not possible then, at least, try to get their feedback or comments on your product or service. If they come up with any advice, take it graciously as it will help you in improving your business.
Having strong customer validation shows that you can easily survive on least resources and this is what we call bootstrapping. If you can show your potential investors how well you can bootstrap, they will gain confidence in your business and come forward for investment.
The next important thing is to be able to tell a compelling story. It’s a must when you are sitting in front of a potential investor with your first pitch. You have to show the investors how your business will scale with time. This should arouse curiosity in their minds and increase their urge to know more about your business plan. This is not an easy job I must say. The investors are often in a state of rush and it is quite challenging to grab their attention. Unless your business sounds interesting, they won’t bother to enquire much about it.
Make a list of your potential investors and approach them one by one. If you start with, say, 50 investors, a time will come when there will be only 3 or 4 investors who will be ready to offer you term-sheets. So make sure you start with as many investors as possible, so that there is enough choice to make on both sides. Also, try to show some urgency. Investors often get motivated to see other investors interested in a business. This will help you grab their attention quickly.
Before you jump into fund raising for your startup, make sure you have a unique business plan, an organized management team, a scalable market and a strong value proposition to present in front of the investors. Simply keep in mind the above aspects and you will go a long way in your capital raising campaign. For more tips for capital raising, feel free to visit http://mergeralpha.com/