Raising capital is perhaps the most difficult challenge any entrepreneur faces in starting a business. And for many, it’s unavoidable. Some resort to family and friends for quick cash. Others get it through loans, leases and investors.
While the road is bumpy for almost everyone keep in mind that patience is key and it will happen.
In today’s business climate, there are literally hundreds of ways to fundraise, and the journey is usually far more complex and daunting that simply soliciting a loan from your favorite rich uncle.
Here are six rules to keep you on the right road to raising capital.
1. Establish clear, realistic goals. From day one, clearly state your startup’s objective. If you can't explain your vision in concrete terms to potential investors, you can't expect them to give you their money.
Be realistic about what you are trying to accomplish. By laying out your plan in detail, you should be able to say with confidence what you can expect to accomplish. Investors deserve transparency and truth. Your partnership must be based on trust -- and only credibility can breed it. Making a good impression with a solid pitch presentation is important, but it won’t guarantee funding. Credibility invokes confidence, which mitigates risk and opens wallets.
2. Have a solid team in place. Any startup is only as good as its people. A strong, efficient and success-driven team is absolutely necessary. Your team represents the company, its goals, its vision and credibility. Recruiting people with sound reputations for honesty and integrity helps attract investments. After all, you are your team.
3. Focus on the “real” market. Exhaustive, in-depth market research is the only way to map a blueprint for success. Many early stage businesses are too eager to get started and end up setting out in the wrong market. The best market for a new business is not always the biggest or the steadiest. You have to do your homework. There is no replacement for in-depth market research.
You and your startup team should profile a variety of markets. That is the only way to determine which one is the best fit for your business. Market research can be tedious, but it is the bedrock of a solid business plan.
4. Get your name out there. The biggest irony in raising capital? You need some capital to do it. Investors won’t know every detail about your project, so you have to decide what essential information to deliver. Fortunately, the Internet is the best advertising medium invented, and it’s always open for new business.
The web is without a doubt the most powerful place to advertise. Even better, it’s cheaper than broadcast TV, radio or print media. Social media can also be a real boon, as solid networking can help you connect directly with potential investors. That’s how you create the support network for your project.
5. Consider crowdfunding for validation. Crowdfunding is one of the best fundraising tools available for startups today. The concept is simple: You advertise your business idea in a number of difference dedicated platforms and users vote with their wallets. A crowdfunding pitch can also be a good litmus test. If you don’t attract investors (or interested customers), you should consider tweaking your pitch or your business model.
Choosing the right platform is paramount. Again, do your homework, this time in the form of due diligence of the companies managing your crowdfunding initiative. You need to verify the solidity and validity of the platform, including the track records of those running the platform.
6. Keep ‘em close. In the end, your success will depend upon the credibility you’ve built and the connections you’ve established. A successful venture is the result of a series of positive interactions between the business and its investors. Keeping investors in the fold will make them comfortable and confident about how things are being run. Remember, they will keep the engine running but only as long as they are confident you are moving in the right direction.
The road to raising capital can be a bumpy ride. But with the right approach, the right people and the right funding avenue, it’s one worth taking.