Fundraising. Every business needs it at some stage. Whether you’re a start-up getting an initial idea off the ground or a scale-up seeking to take it to the next level, that extra bit of cash can prove to be the difference. But how should we be going about it? In the digital age, one could argue that it has never been easier to raise a few extra pennies…There are a huge range of different types of investor out there, and it is important to pick the right ones to approach if you want to have productive discussions. Click To Tweet
Choose the right style of investor
There are a huge range of different types of investor out there, and it is important to pick the right ones to approach if you want to have productive discussions. For those looking for full advice on this, VC fund Mozaic Ventures have produced this great overview of all the funding options available, from friends and family to corporate venture funds.
Depending on your businesses revenues and business model, there are a investors at every stage to help you. Angel investors focus on helping young and rapidly growing businesses, and there are accelerator programmes available for people who are wanting business advice and connections in tandem with their funding.
Furthermore, investors often specialise in a vertical sector or two, with technology being a particularly hot investment area at present. It’s worth taking the time to research the right type of investor and to find ones in your suitable industry, otherwise you’ll find your discussions to be particularly short!
Network, network, network
Entering competitions such as The Pitch, which specialises in giving small businesses a platform to be heard, can act as a gateway to fundraising. Even if you come away without the top prize, events like these are bound to be attended by prospective investors, presenting you with a perfect opportunity to network.
There are also large events for start-ups such as Slush in Finland or TechDay in London exist to bring together start-ups and investors. These events can be a great way to approach a large number of investors at once, so can be worth assigning the time to attend.
Outside fundraising events, think about how your personal network can help you find potential investors. Don’t underestimate the value of a personal introduction to a venture capital company or an angel investor. Many VC’s state on their websites that they prefer introductions through known connections to a cold approach.
If you are an early stage company, your personal network could also be where you end up finding the fundraising you require. Friends and family, not to mention business connections, can regularly be inspired by your innovative ideas and want to help, or to share the winnings with you. Don’t leave any stone unturned!
Work hard on your business plan
We’ve all seen those cringeworthy episodes of Dragon’s Den, where Deborah Meaden, Peter Jones and the rest are asked to invest extravagant sums for a measly stake in a business that appears destined to fail. Don’t be that person – make sure you have a credible business plan before speaking to a single potential investor.
Producing a strong business plan can be a very time consuming process so make sure that you are really committed to fundraising before starting off as it will likely distract you from other tasks which would grow your business. A business plan will require financial projections which include sales performance, cost of service delivery and all the business overheads you will require.
You’ll also require a strong document to accompany the numbers, with information about the business, its unique value proposition and its leadership team. Try to show a potential investor why they should invest and give them a sense of what returns they will get on their money. This business plan, along with how the founders present the concept, will dictate the decision a potential investor will take so it is worth getting it right!
Have a look at crowdfunding
There are stacks of crowdfunding websites out there that are designed to help you. Indiegogo, Kickstarter and GoFundMe, to name but three, are popular choices and it is worth analysing the market before committing to one.
It is likely that you will have a specific target in mind when starting your crowdfunding campaign. Should you miss that target ever so slightly, only some crowdfunding sites will let you take what you raised anyway. Others dictate that you must reach your target if you wish to take home anything at all. Small start-up fees can also be expected, so shop around before deciding on the best platform for you.
Crowdfunding also creates a feeling of community among your backers. If they are financially, as well as emotionally, invested in your product, they will feel more obliged to use your service further down the road.
Go get your fundraising!
If you’ve got a strong business plan and a clear idea of who to target then start booking those coffees or glasses of wine with your personal network. Tell them that you are looking to raise some finance and see who they may know from your list of targets. Put your best foot forward and treat them as potential investors too, as you never know, they may end up wanting to jump on board.
It can be a scary process but it’s fun too so take a deep breath and jump in. Go get em!