Ambition, determination and perseverance are key ingredients to business success. Money is the key ingredient to making a business viable. It is much easier to fund a startup than most people think. It is because of the many myths about funding and how it can be obtained. Many entrepreneurs mistakenly believe that sound logic is good for their business.
The money needed to start or run a business is called funding. It’s a financial investment that is made in a company to fund product development, manufacturing expansion, marketing, office space, inventory, and sales & marketing. It can be sourced from many sources and used to build a company from its inception stage to become a functional and profitable entity.
Relying on existing networks
Although the network of family, friends, and professional connections might be sufficient to launch a business and raise initial capital , it will not suffice once the business is up and running. Entrepreneurs need to make as many connections as possible with investors in order to fundraise. To increase the number of connections, it is crucial to invest in networking.
Don’t invest in creating professional marketing collateral
Investors are often presented with thousands of business plans each year, asking for funding. To attract investors to a round, a company must communicate the unique value of the business through well-designed marketing materials. To attract investors, a business must have a compelling marketing campaign.
Underestimating the time frame for funding
Finding the right investors can take as long as a year. Due diligence may also take up to 12 months. An entrepreneur seeking funding should plan for at least 12 months before achieving their funding goals. This requires careful planning for business operations.
Only Focus on Partnering
Investors may be required to invest equity as part of the funding route. This is often mistakenly assumed by new entrepreneurs to be a move towards a takeover. They are defensive and offer investors an asset partnership. This is counterintuitive as it restricts the investors who can receive funding.
More data is needed
To start a dialogue with investors, it is important to establish a channel of communication. Therefore, it is more important to know ‘when’ than ‘what’. It is important to get to the core of the issue as quickly as possible. Investors will request additional data if they need it. Investors will first need to see the product or service they are interested in funding.
Being in Stealth Mode
Fear of the idea being stolen can stop a business from promoting the invention. The product must be presented to investors to highlight the benefits of investing in the company.
Take the time to get to know a Venture Capitalist
Fundraising is a numbers game. Most companies fail to complete due diligence and are unsuccessful in obtaining funding. However, this is not a reason to give up or stop searching for investors. This should lead to double funding efforts.
One category of investors gets our exclusive focus
It’s not wise to choose only a few options before considering all possibilities. Entrepreneurs must search the market and understand the options available for raising funds . They also need to be able to cast a wide net in order attract investors.
Are you not interested in speaking with the associate-level staff?
In essence, the associate-level staff is the gatekeepers to the industry. It is important to realize that executives often act on reports from associate-level staff. It is in the best interest of entrepreneurs to maintain a healthy relationship with them, as they may be the route for funding.
Questions around Focus and Organization
Fundraising can be overwhelming. It’s not enough to have colour-coded spreadsheets that allow you to organize and present all of the information. It would be a smart investment for the business to have the right cloud infrastructure in place to support its campaign.
Avoid Equity Diluting by relying on banks
Although banks can be great non-equity partners , they are rarely willing to take on the risk of investing in a startup with no collateral or personal guarantee. They also have a strict covenant with a monthly payment guarantee.
Contrary to popular belief, getting funding for your business is not nerve-racking. However, it is important for entrepreneurs to carefully evaluate all funding options before making a decision. The ultimate goal of a business is more than just raising funds. It’s about maximizing the funds so that the business grows and becomes profitable.