6 “Must Know” Truths When Raising Capital
An excellent piece from Erica Drake about the six things you need to know when raising capital. Erica takes you through finding the investors’ sweet spot, knowing what type of finance you need, and explains deal structures. Don’t miss why it’s easier to raise a larger sum than a smaller one.
The images aren’t of great quality, but they hold some valuable insights on investor “sweet spots”, for example. She also covers the type of opportunities best suited to angel investors, private equity firms and venture capitalists – no, not all investors cater for the same market/s.
You can have the sexiest and most exciting company in the world, but if you don’t understand the language and strategies of these investor sharks, they’ll eat you for lunch! The investment world is a brutal battlefield! You must understand what investors are doing, saying and how to strategically plan your attack. Below is the overview of the investment industry, language and strategies that you need to know: Read the rest.
Updated 19/01/19. Related:
How to raise finance for a startup
This is a matter of much confusion for first time entrepreneurs. They ask about the best location to find investors, or the best site for matching investors with entrepreneurs. Even worse, they post about their awesome project or idea and invite investors to contact them!
That’s not how it works. The strength of your enthusiasm, your conviction that yours is a killer idea or guaranteed to become big is…. great, but useless on it’s own. You have to combine all of that with a lot of legwork.
Investors are not trawling Reddit, forums, Facebook looking for people with ideas! Life’s too short. There are millions of people with ideas and real investors don’t have time to go hunting for them and filtering all the dross because, let’s face it, most of those people are clueless about business, and they will fall flat on their faces and lose everything. Most new businesses fail in the first year. Investors know that and have to be super selective when it comes to choosing where they put their money.
You, as an entrepreneur, need to work hard to find an investor. If you think you’re going to get one through posting somewhere and sitting back, you’re going to be sorely disappointed. You have to put yourself out and you have to do a lot of work that is completely outside your comfort zone.
But first you’ve got to flesh out your idea / proposal. You need to know exactly how much you want, exactly what it will be spent on (and when) and what sales you are going to see and when. You need to create cash flows, financial projections, business plans, plenty of other paperwork and, importantly, plenty of answers to the quite demanding questions and challenges investors will come up with (when you do meet investors). Then you need to practise your pitch and finally find the people to pitch to.
[[If you’re an established business you’ve got to come up with even more – you’ve got to get together piles of financial and legal documentation, prepare an information memorandum, create a marketing strategy to get the opportunity in front of the right investors, (ideally) have someone who knows what they are doing to negotiate the deal for you, have an accountant and lawyer to hand to deal with the due diligence questions etc. And money to pay adviser fees! (Yeah, trying to do it on the cheap without shelling out for good professional advice often ends up being the most expensive way)
It’s a lot, lot, lot of hard work!]]
The entrepreneur looking for startup capital then has to hunt for investors – visit angel groups, pitch at events, set up a crowdfunding campaign, whatever! There are plenty of good articles around if you care to use your favourite search engine. If you’ve posted asking for how to find investors and you haven’t done a few searches already and read a few good articles on finding investors, are you sure you have the “get up and go” to be an entrepreneur? Please do think about this carefully.
If you’re already read some articles, then great, and I wish you all the best with raising the money.
The idea of being an entrepreneur is all very exciting, the facts on the ground are that involves much hard work and sacrifice. It does not suit everybody.
