Needs to Raise Money
As the business grows, additional funding may be necessary to support expansion and operational needs. Entrepreneurs must prepare to present their business case to potential investors effectively, demonstrating market potential and a solid plan for growth.
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Many steps must be taken before a company should attempt to raise money. “Don’t even try” is the best advice to those who want to raise money from financial investors. Entrepreneurs should first focus on investors that invest amounts similar to their request. Time is your most precious resource; spend it on building a business not investor slides. Demonstrable market acceptance is the key to raising money; not a good idea. Solicit candid opinions from seasoned startup veterans to avoid quick rejections from investors. Focus on minimizing the market and product risk before seeking investment. Investors invest to make money, which may not be the same motivation as the entrepreneur. Different investors can offer significantly different expertise in addition to their financial support. There are several different types of investment instruments that should be considered. There are more investor options than angel or venture capital investors that are available. Focus on specific investor categories that fit your model and long-term goals. Establishing a mutual satisfactory relationship between the company and their investors is critical. In reality, business models accurately predict what most likely will not happen. Identify the key elements and variables before building the financial model. Build the financial model based on the revenue phases that the company will go through. Your financial model will grow and become more complex; initially build in flexibility. The key metrics are the time and cash required to break even and the revenue growth. Develop a clear planned use of funds for the investors; include amounts, timing, and milestones. You cannot expect investors to study your financial model; provide summary conclusions. The Valuation of a private company is an opinion that may or may not be based on an evaluation. A private company’s valuation are nothing more than a person’s opinion and may vary widely. Focus on what investors want to hear, not what you want to say. Clearly define the desired end message before you start creating your investor pitch slides. Clearly define the desired end message before you start creating your investor pitch slides. Be more than skin deep; be ready to provide detailed data to potential investors quickly. Written FAQs documents dramatically help ensure what was heard aligns with what was said. The same, universal pitch universally does not work for all audiences. People naturally eliminate the bad before focusing on the good. Nothing happens until investors get excited about a potential investment opportunity. Use term of art words and abbreviations only when absolutely necessary. Saying too many things may communicate nothing; less is more. Investors are interested in specific, verifiable facts, not generalizations. Being first also means being the first to make mistakes. Explaining Why you started the company can establish a relationship with potential investors. There are a series of common messages that are sure to get an investor’s attention. A slip of the tongue or an obviously incorrect statement can quickly turn off potential investors. Pretend you are the investor; ask yourself a series of questions that they might ask.