How to Raise Money From Investors

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Source: forbes

One of the biggest reasons why people do not venture into entrepreneurship is lack of capital. It is also one of the biggest reasons why people go out of business. Suffice to say, capital tends to be a big driver of businesses in several ways.

That should not, however, be a premise for failing to start a business or going out of business altogether. You can always look for financing options to get the much-needed capital. One of those options is to raise money from investors. Raising money from investors is a skill that can be learned. That is what we will be looking at in this article. We shall be discussing the important things you must know.

An Interesting Gender-Based Insight

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Studies shows that businesses run by females tend to succeed more than those run by males. This may be subject to debate but some studies have shown that. It has also emerged that businesses run by females tend to be downplayed yet being potent enough to succeed. This here presents an interesting dynamic – how investors can actually consider this gender element.

Thus, when looking to seek out investments take time to comb through the prospective investor’s investment portfolio or history. It might be in your best interest to know the investment habits of a respective investor. As much as biases are not good most investors tend to have gender-based biases when deciding on whom to fund.

Pitching Is Inevitable

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Supposing you have been given the platform to speak with an investor you will have to or be required to pitch your business idea. The time you will be given to do that pitch varies from investor to investor. What we can advise you to do is that always have one-minute pitches ready.

If you actually get more time that will be a bonus for you. Most investors have no time to entertain you for long given their busy schedules. The important thing is for you to have a comprehensively constituted yet compact pitch – well rehearsed so that you can deliver it any time.

Must-Haves For Your Pitch Content

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Your pitch is usually the key to your getting funded. It is also vital to also have a business plan handy as that will be necessary for further evaluation of your business idea. More information about business plans can be found on this website. In your pitch clearly show your business’ unique value proposition.

Your financials must be well presented i.e. turnover, gross margins, net profit and so on. Investors are so keenly interested in those details. If any, point out notable accomplishments your business has attained – it beefs up your credibility.

High-Risk High Potential Businesses Stand A Good Chance

Source: business

Investors usually want to fund businesses that have two key attributes namely, high risk and high potential. This means that if your business does not wield these qualities getting funding might be a long shot.

Essentially your business must exhibit the quality of being scalable into a big brand as time ensues. That is what investors want to invest in – businesses that will bring about huge returns on investment. If your business is high risk yet high potential, it is even possible to get funding from angel investors.

Raising Money Is Not A Once-Off Thing

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Bear in mind that raising funds from investors is not a once-off thing. You might have to take a stepped approach which is cumulative in nature. What we mean is that you raise a certain funding amount to use to take the business to a certain level. Then once it gets there you then set out to raise more funds in pursuance of another level you want to reach.

The beauty of this approach is that if you do reach all those levels you set out to reach the valuation of your business will be getting bigger and bigger. This would mean that getting investors to fund you becomes far easier as you move ahead with each new level attained. This also means that you can end up getting investments from several different investors towards just that one business.

Know The Various Funding Options And Terms Available

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When approaching investors you must be well versed with these options. There are several of them, for example, angel investors, venture capitalists, and crowd funding just to mention a few. When talking about investments we can mostly look at angel investors and venture capitalists.

Angel investors are not always easy to find, they are investors who are more concerned with helping people to set up businesses. When they fund someone they do not necessarily need to be paid back or they might not want paybacks with interest. Managing to get an angel investor to invest in your business will be a jackpot.

Then there are venture capitalists – they want their money paid back and with interest. Their thrust is to fund you to get definite and guaranteed returns on investments. When approaching investors you must know the type of investors they are so that you know how to discuss with them.

What Is In It For The Investor?

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Most investors want an offer from you in exchange for the capital investment you are asking from them. Actually, they usually want equity or a stake in your business. Demands or conditions may vary as some might simply want principal repayments with interest. Whichever the case may be you must be ready to negotiate.

It is important to know the implications of offering up equity that is too high. For instance, offering up a 60% equity in exchange for a capital investment might not always be a great idea. This is because you would not be having a say in key decision making. Thus, when approaching an investor know what to offer and be ready to negotiate.

You must also consider that most investors want to invest when you have injected or contributed something of your own. This shows that you believe in what you are doing and are willing to take risks. Try as many options as possible; never give up! Once you master these skills, you will be able to get funding for any kind of business!

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