Last Updated on December 18, 2022 by Selina Parker
Raising money is necessary for any business, but how do you do it? With the proper guidance and information, raising money can be easier than you think. The following article will provide nine secrets to increase your chances of raising capital.
How to Raise Money for a Business and Increase Your Chances of Raising Capital
Prepare Your Cap Table
Small business owners often believe that the percentage of a company that an investor will take is “negotiable” and “subject to negotiation,” when, in reality, most novice investors are aware of how much a fee cut they must take for the investment to be worthwhile.
As a result, creating your up-to-date cap table-i.e., “capitalization table”-or something that details the equity distribution between investors or workers is critical. Transparency is vital since investors will soon be a part of your company.
A cap table also shows how diluted the shares of an existing investor will become with new investment, making it an essential document for capital raising.
Create a Compelling Story
To make your company stand out from the rest, you need to have a compelling story that investors can get behind. What are you trying to achieve, and how will you get there? What makes your product unique, and how do you plan to market it?
Creating a compelling story will help investors understand what your company is all about, which increases the chances that they’ll want to invest.
Develop a Solid Network of Contacts
To get introductions to potential investors and to raise capital for your own business, you need to have a strong network of personal and professional contacts. Build relationships with individuals already in the know, whether angel investors, venture capitalists, private investors, or other financial institutions.
Building relationships with them before trying to raise funds will put you in a much better position when the time comes. These individuals can also introduce you to their own personal and professional networks, increasing your chances of finding interested investors and getting money for your business.
Attend Events and Conferences
Another great way to meet potential investors is by attending events and conferences related to your industry. Indeed, these events will include venture capital investors, angel investors, and business incubators. It will help you gain valuable insight and business ideas into how other businesses operate. Still, it will also allow you to get in touch with people who can potentially invest in your company.
Sell the Benefits of Working With You
Do not just sell your product or service, but also how it will benefit your customers. How is the product useful, and how does it make their lives easier? What makes you different from your competitors?
Remember: while some investors may be interested in the financial opportunity, others are looking for a more advanced purpose or mission, like how their own money can help them positively impact society and the world by investing in small businesses.
Know Your Audience
Tailor your pitch to each investor so it’s relevant for them specifically. Please don’t make assumptions about what investors want or how they think. Please do your research and find out as much as you can about their backgrounds, interests, and investment philosophies.
It will help you better understand how to position your company, showing that you are serious about working with them. It demonstrates that you clearly understand how valuable their time is and appreciate it.
Be Prepared With Data, Not Anecdotes
The bottom line is that investors and venture capital firms want to invest in a company that will make them money. They don’t want to hear how your product is the best thing; instead, show them how it can succeed financially.
Know Your Competition
Be ahead of the curve and know your competition inside out. What are your competitors doing that you’re not? What are their weaknesses, and how can you avoid them?
Understanding your competition will help you better understand how to position your company in the market and what areas need improvement. This information is essential when attracting investors, as they will want to know how you plan to stand out from the rest.
Have a Clear Roadmap
Regardless of whether you’re trying to get funding through angel investment or a venture capital firm, they want to know how you will use their money, and they want to see a clear roadmap of how you plan on getting there. What are your short-term and long-term goals? How do you plan on achieving them? Do you have a solid business plan?
It reassures the investor that their money is going towards a specific purpose and how you plan to get their money back with interest. A well-thought-out roadmap also shows you have a clear idea of what you’re doing and how you plan your new business to succeed.
Above all, be honest with your investors. If something goes wrong, be upfront and tell them immediately. Dishonesty will only come back to bite you, and it’s always better to be truthful from the start.
Raising capital for a business is hard, but you can increase your chances of success with the proper preparation and knowledge. Remember the tips above to help ensure that you attract investors who are interested in seeing how far you can go with their support. Another way of raising capital is by getting small business loans offered by the Small Business Administration (S.B.A.) or bank loans.
Get more raising capital strategies from The Fully Funded Method.
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ABOUT THE AUTHOR
“What began as a life and career coaching services company to aide entrepreneurs through the early-stage challenges and tough transformations of starting a social venture has evolved over the years to include mergers and acquisitions, organizational consulting, and business growth advisory services to mission-driven organizations that strive to improve access to basic physiological, safety, and security needs while increasing their profit margin. Clients include founders and organizations with the purpose of addressing deficiencies in delivering quality healthcare and mental health services, sufficient employment, access to clean water and air, safe shelter, adequate food, and more.”