Launching a new business from the ground up may be one of the most stressful and challenging aspects of your career. While some businesses are launched without hassle, many of them run into the challenges associated with getting start-up capital. The reality is that the opportunities to raise capital are small. After all, people are not lining up in droves to contribute money to your project.
While fundraising can be stressful and challenging, it is also an art form that features best practices that can generate real results for you. Consider the following advice before embarking on the journey of raising capital for your start-up.
Think Like an Investor
Before you make a sales pitch to request funds, you need to focus on the overall impression you are planning to make. You must show that you believe in your business model and present the deal to the investor in the best possible light. Ensure that they understand your business model and what is in it for them. Remember that many investors look for scalability in businesses, and you need to show how scalable your business is and what your plans are for each and every stage of its future growth.
Investors want to see how your great idea is going to produce a clear and legitimate return on investment for them. You also need to address the risks that your business may face and the steps that you plan to take to mitigate those risks. Investors do not want to contribute funds that will be used to pay high salaries and expensive office space that is not needed.
They need to know exactly how you plan to use the money and see that the money will be used efficiently.
Your presentation should be detailed and well prepared. It should focus on your finances and explain in detail the stages of your business growth and financial needs at each stage.
Investors Invest in People
While investors need to see that you have an excellent money-making idea, they also want to develop relationships with you as an individual or with your entire team. Teams are often preferred because of the more expansive depth of knowledge that many people may bring to the table.
You need to show off your business skills in a charismatic way if you want to convince investors to work with you. It may be wise to closely analyze your current team. Do you have specific weaknesses in your team that you may be able to overcome by bringing a strategic partner on? Spend time building your team before you pitch a proposal to investors if you want to enjoy the best overall results.
Make Sure Your Pitch Is Perfect
You only get one chance to pitch your business to a group of investors, and these are often busy individuals with a million things on their minds. Review and practice your pitch numerous times to ensure that your delivery is clear and concise. Don’t add time-wasting fluff into your presentation and focus on creating a sales-oriented pitch that clearly defines what it is you are asking for and why.
Focus on highlighting how your business will provide a return on their investment. Spend time creating effective visuals to get your point across more accurately and concisely as well as to capture their attention. In addition, if you are starting a business so you could launch your new product idea, make sure to have a prototype ready. That way, your potential investors will be able to visualize the final product better.
You should also consider formulating your pitch specifically around the investor’s interests and goals. This means that you need to research and understand who your investors are before developing your pitch.
Always Follow Up
Within a day or two of pitching your start-up idea to investors, follow up with an email to thank them for their time. It may be wise to include a short bullet point list of pros about your business as well as a link to your pitch or website. If investors had any specific concerns regarding your business model, you may consider following up on their concerns with more specific statistics and data.
Even if you follow these tips, you might have to pitch your business idea several times before an investor shows interest. Each time you deliver your pitch, analyze what went well and what could be improved. By doing so, not only will you get a chance to work on the negative aspects associated with starting a new business, but also improve your odds of getting funded when the next opportunity arrives.
This is a guest post by Heather Redding. She is a part time assistant manager and freelance writer based in Aurora, Illinois. She is a coffee-addict who enjoys swimming and reading. Street photography is her newly discovered artistic outlet and she likes to capture life’s little moments with her camera. You can reach Heather via Twitter.