4 Things Entrepreneurs Should Remember When Raising Capital
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You have a business idea, or a plan on how to improve some problem in the market. You want to launch a business around that invention or idea. How do you get the capital necessary to start your business or maintain your business? You might have heard about crowd funding sources and venture capitalists with plenty of money to invest, but what can you do to capture those funds?
1. Remember the bottom line
A marketing campaign that costs more than what your revenues are will not attract investors. The investor doesn’t want to fund your pie-in-the-sky vision. He wants to fund his own. Remember that when he invests in your company, it is a way to support his own financial goals. Show investors a scalable marketing plan that is tied to sales, starting with how you plan to market your business with zero revenue.
You have to be careful how you spend their money, that you will carefully and systematically spend it. You need to acknowledge that you understand investors want to reach their business goals not yours. The best way to show this is meticulous management of cash flow. This includes a gated-approach to marketing spending, hiring and salaries.
2. It’s a pull mechanism, not a push
You have to think about the user, not the product. You have to ensure the product solves a problem the user has. This is the same mindset to take when trying to appeal to an investor. You want to emphasize how great your business will be to the investor’s overall portfolio of investments. Your messaging should not be to push a product onto customer but rather everything that is said about your product should pull a customer’s attention.
To be effective, show the investors why buyers will want this product. Research your investors carefully. You need to define your ideal investor and design a business plan that attracts that investor’s attention. Investors have their own mandate and preferences, and you should know what those preferences are. Create a plan that compels them to act after reading the first few lines.
3. You want to have time in the market
The amount of time you spend in the market is more important than trying to figure out when that market will be hot. The truth is there is more funding available than there are good projects. Good ideas are recession or even depression proof. Therefore, go after the money now. You should spreading out your message over a long period of time. It’s better to start developing your network far in advance of needing the funding and nurturing those relationships. Being known as an industry person is an extremely valuable asset and the only way to be known as an expert.
4. Tone down your message
Investors know that home runs in business are rare. You shouldn’t pitch your company as the next big thing. Instead, talk about the virtues of your product, why it’s better than the competition and how you will work daily. Instead, stress profitability and how quickly you will get there. Stress that although you think this thing is going to be a knock-out punch, you know that it will bring consistent and reliable returns for the investor. Show them the plan but highlight the other aspects too. This shows temperance and an understanding that the investors are gambling with their money. They don’t want to lose their hard-earned dollars.
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