Capital Raising Dos and Don’ts for Every Entrepreneur
Coming up with a great idea is sometimes the easy part when it comes to business. However, raising money to make that dream a reality is often where the real challenge lies.
Delivering a great pitch and finding the right investment is one of the biggest tests you’ll face in growing your business. The key to being confident, aware, in control of the deal, your business and reputation is to always be prepared when attempting to capital raise.
Some of the nation’s most successful business people shared their thoughts about capital raising recently at the 2021 Naturally Good Expo business summit.
Investors are prepared to fork out for a great idea
Although it seems like times are tight, there will always be investors willing to take a chance on a great idea if it’s presented well and they can see potential. Having helmed successful cookie business Luken and May and beauty company Luk Beautifood, Cindy Luken revealed she once raised $2 million in just six days. Michael Fox of plant-based meat company Fable successfully raised $1.7 million for his business in an initial round, followed by $6.5million in a second round. Previously he had raised an astonishing $35 million for his former business, footwear company Shoes of Prey.
Tips when searching for capital
Both Ms Luken and Mr Fox said being strategic was vital before approaching an investor and gave these golden rules:
- Understand the business you are looking to build inside and out before you start talking about it.
- Research as much as possible beforehand. There is so much information available about capital raising, so read up.
- When deciding upon your approach, preparation is the key.
- Get to know your investors beforehand and during the process. Once a partnership is established it can become like a marriage.
- Create momentum as nobody likes FOMO (the fear of missing out). Whilst it can be difficult to secure an initial investor, once you do, then it’s much easier to get other investors to commit.
- A good investor is great, but a bad investor is horrific. If things seem off, then re-evaluate.
6 ways to raise capital
- Self-fund yourself
Diving into your personal savings, whilst it sounds scary, is probably the easiest way for a startup to raise capital. It can be risky, but if you display confidence and back yourself, it can make other investors or lenders more likely to take a chance on funding you.
- Try crowdfunding
This has become increasingly popular over the last few years with many start-ups using crowdfunding to raise money for a business as a whole or particular product. GoFundMe, Kickstarter and Indiegogo are some of the best-known sites.
- Get a business loan
Whilst a loan approval is not always guaranteed, small business loans are still a major option for many entrepreneurs. Bear in mind, you need to meet specific requirements, like being in business for a certain period of time and having an excellent credit score.
- Approach an angel investor
These wealthy, accredited individuals seen on shows like Shark Tank and Dragon’s Den usually fund businesses alone but sometimes join in on deals with other angel investors. Given it’s their personal fortune at stake, make sure you have a solid business plan and pitch ready, with all the key financial information at hand.
- The venture capitalist road
As opposed to angel investors, venture capitalists tend to invest in more mature companies. They are also usually classed as a firm rather than individual. Venture capital firms invest in a lower ratio of businesses applying for funding. However, when they do, they generally invest more money.
- Use personal contacts
You might not feel comfortable reaching out to the bank of Mum and Dad, however many businesses got their start thanks to loved ones investing. However, bear in mind it can be stressful, and there needs to be clear communication as to whether any money is a gift or a loan.