Raising money for a new business is always a challenge. Most people don’t invest enough time or energy to prepare themselves to secure financing, which is why so many owners default to bootstrapping their operations. If you are looking to secure outside money from sources beyond friends and family, serial entrepreneur Brad Sugars shares some tips to position your venture as good investment.
Know what investors want
Investors look for three things—the idea, people behind the idea and how they would get their investment money back. It is difficult for most businesses to get funding because sometimes one or two factors from that equation are missing. What is the idea is amazing, but the team is weak? Or perhaps the idea is great, the team is strong, but a company doesn’t have a realistic revenue generation plan.
If you have a business which takes care of all three needs of investors, it will be easier to find one.
Think of your worst-case financial scenario
To know your real need, you need to be realistic about your projections. Try to figure out your worst case financial scenario and use those numbers for your ask. Most startups don’t consider how difficult it is to acquire customers, develop marketing and find working capital.
Try cutting your initial sales to half, and double your projected expenses—then use that as a base and plug in an additional 30% in costs. It is better to raise more than you need rather than trying to secure a second round of financing later on.
If you want serious investors, be a serious investment
If you are really looking for a good investment, do your market research and due diligence to see if the business would be viable. Rather than asking for money from friends and family, which can have many downsides: lost money, hurt feelings, families torn apart and friendships broken forever. Instead, try your luck at private group of investors, which will force you to do in-depth thinking on your concept and help you to sell your idea better.
The important thing is to not get discouraged—you might have to go through 50 ideas before you can hit on a profitable model that yields a return. Failure rates are high because the majority of ideas have a limited appeal or try to enter a saturated market.
Your best strategy is to use the knowledge, information and numbers you discover in your own research to uncover a unique idea or a high demand niche you can fill. You will have the data and knowledge needed to show potential funders that their investment is well spent.
For more information on the same, you can visit: http://www.entrepreneur.com/article/226334
Thanks for reading, and until next time… stay WISE!