Should raising money in today’s economic climate be the equivalent of “pulling teeth?” NO! We know. We’ve been on both sides of the fence, as entrepreneurs raising money and as investors.
We have used our experience and built the CAPITAL.MY to address this daunting task and make it easy for the capital seeker and capital provider to come together with common goals. That’s just the first, all important step…to get you in front of the right investors who’ll look at your deal.
SECRET #:1 Who are you dealing with?
Every capital provider, be they an angel, venture capitalist, private equity firm, or your favorite crazy, rich uncle, has their own set of investment guidelines they follow when making investments. You should learn as much as you can about the people you will be asking to become a part of your company.
In today’s internet age everyone has a web presence. Visit the social media page, company website etc. of potential investors to learn about them and their investment strategies (They will definitely do the same to you). Typical rules include geographic focus, investment stage preference, lead/follow-on investor, minimum and maximum investment amount, industry focus and board seat requirements. Make sure that the strategy of the firms you are targeting match your funding needs.
SECRET #2: Get personal
If you’re cold calling, stop the insanity! It just doesn’t work. You’ll hear the expression, “Deals thrown over the transom,” more than once. It means someone just tosses their business plan over the door hoping someone finds it, reads it, falls in love with it and funds it. We built CAPITAL.MY to eliminate this practice by selecting quality business opportunities and matching them with quality investors. Capital providers are looking for good investments and tend to prioritize personal introductions.
SECRET #3: Get to the point, will you?
You’ve secured your first meeting with the person with the money. Hooray! Now, get right to the point. Time is money and if you’ve gotten this far, don’t waste their time or yours. I’ve sat through countless meetings with a capital seeker looking for money; they usually have a great idea or concept but can’t articulate it and loses me in minutia. Be crisp. Be clear on what you do, who buys your products, how you make money, and how you plan to grow. Keep presentations under 12 slides and executive summaries under 2 pages.
SECRET #4: Is your team the right team?
A business is driven by its people. No matter how unique or brilliant a business idea might be, after all the ideas need to be propagated and executed by people. Therefore, success of a venture is primarily dependent on its core management team and the cross section of manpower involved. Their credentials, business acumen, technical expertise, past experience etc, are all vital indicators for business success. Therefore, in order to prove your mettle as a profit generating business venture, you must have accomplished manpower and a well-equipped management team at your disposal. They should be in a position to realize your business vision and take it to newer heights. Often, excellent business ideas run out of steam, only because they are subjected to incompetent hands and minds.
SECRET #5: I’m different…I really am!
If you don’t know who your competition is and why you’re better than they are, at least after funding, then save the trip. Everyone has competitors. Those that say they have no competitors are not believable. Directly present yours and the measurable difference your product or service offers. Identify them, don’t be afraid of them, and make your deal better than theirs. After all they were there first and can be picked apart for weaknesses.
SECRET #6: Your value proposition
What is your value proposition to the customer? How does your business save time or money or both? What is the cost to the customer of not using your product or service? Show the investor how darn valuable your product or service is to the market you address.
SECRET #7: The real market size may not be as big as you think
Who exactly are your customers and what is the real market you are serving? Don’t be expansive. Be realistic. What is the exact size of the addressable market of purchasers of your product or service? Don’t use “fuzzy math”. If you tell the capital provider “if we capture 1 zillionth of 1% of the market we’ll make billions!” your credibility will be called into question. The people with the money have resources necessary to corroborate or refute your claims. After all they have the money for a reason.
SECRET #8: Know your numbers!
How will your company spend the money and how does this all come together to break even and make a profit? Explain the key business drivers such as number of customers, sales per customer, cost per customer etc. Show a bottom-up analysis of how many customers you need to hit your numbers. Be prepared to discuss what you would do with more money and how you could make it with less, which is usually what the capital provider wants to know.
SECRET #9: Tell me the ROI
The most ideal exit strategy for a business, from the point of view of an investor perhaps is simply to sell off the whole project. A takeover can have a good return on investment, can occur within a comparatively short span of time and involves less confusion. If the organization has been successful and prosperous and the marketplace is right for their product / services, then selling an equity spot can provide a great yield.
Provide tangible examples of recent and related acquisitions by at least 3 different categories of potential acquirers (suppliers, distributors, competitors). Be prepared to cite 5 companies in each category to show that there are plenty of viable of exit options and don’t forget to tell the investor the timeline to harvest his reward.
SECRET #10: Valuations come last
Valuations for startups and early-stage deals are virtually worthless, so don’t get too excited. If there is virtually no operating history and financial data is spotty, be realistic. DO NOT use the words “it’s based on conservative numbers”. Early stage valuations are subjective, so get over it. Your first round of investors will probably own 30%-50% of the business.
Keep these 10 points in mind when you set out to build your business plan, build your company and seek the capital you need to forward it.