Championing Entrepreneurship, Content Type, Developing your Skills, Financial Insights, Start-up Financing, Tips & Tools | January 5, 2018
Money to start a business, money to run a business, money to develop a business – at any point in your journey as a young entrepreneur, capital is a constant need.
And finding the most beneficial and strategically appropriate funding channels is always a stressful task. At the end of the day, you don’t want too many of them; you just need to make sure that they are safe and reliable sources and are relevant to your business.
If you are the point where you want to attract investors for your start-up, here are four things you can do:
All sources of business funding can be divided into several common categories. To start, assess your own ability to support a new company. If you don’t have enough start-up capital on your own, you can reach out to friends and family.
At the same time, unless you are related to an industry mogul or a multi-millionaire, personal investments alone are rarely sufficient to support a new business. That’s when external sources come into play.
Most of the time when people talk about investors, they are referring to venture capitalists (or private equity firms), angel investors or peer-to-peer lenders. These options are applicable only when you are willing to give up a share of your business.
You can also take out a business loan from a trustworthy bank or organization like Futurpreneur Canada. In this scenario, you will be committed to repay the money credited to you with an added interest rate. Grants are also a great way to fund a new start-up, as well as crowdfunding, which involves attracting public interest to your business proposal and letting interested parties fund it.
When raising funds, many young entrepreneurs make the mistake of trying too hard to impress potential investors and end up coming across as “fake.”
While you might adjust your business storytelling approach to suit each prospect stakeholder, it must always be consistent with your real financial records.
Be realistic when assessing your start-up and your ambitions. Underestimating the potential of your business may lead you to ask for more money than you need. On the other hand, overestimating it puts you at risk of not meeting your financial projections. Investors don’t like either of these scenarios.
Financial management is an essential skill for entrepreneurs. Before you seek out investors, you should try to increase your business cash flow, cut unnecessary expenses and eliminate excess costs as much as possible. You might also want to hire a professional third-party accountant to help identify any major and minor mistakes in your financials.
As in any other aspect of business – and life, really – you have a better chance of receiving someone’s support when their aspirations, plans and passions align with yours. Such investors believe in your ideas rather than in your potential revenue. They believe that what you do with your start-up can benefit their company and their clients.
Commonly referred to as strategic investors, companies and individuals of this category are much easier to attract. Besides that, they are often familiar with your business’ market, which gives you an opportunity to gain insight and learn from their experience.
If strategic investors buy into your ideas, it means they see a potential for a future partnership with your start-up. Your business plan might not be ideal, but your genuine interest and authentic passion for the industry will play a crucial role in helping you get this kind of investor on board.
Investors are not robots; they appreciate healthy human communication and they are prone to biases and fallacies. Therefore, your respect, interest, and attention are important when establishing a potential partnership.
Follow up with each member of the panel after your presentation to personally thank them for their time. Be patient and don’t expect them to give an immediate response. And most importantly, stay positive even in the face of rejection.
Every investor you meet is a potential gateway to a larger network. Just because one investor turned you down, doesn’t mean you might not find an even better supporter down the road.
Ekaterina Grishko is a Marketing Coordinator at Ashton College. Founded in 1998, Ashton College has become a national and international force in the field of higher education.