How to Get Startup Capital?
Here are the top 10 tips for raising startups capital:
Startups are a Team Sport: Have a team of at least two people with complementary skills and talents show investors. For example, a great combination is where one has a strength in closing sales while other has a strength in ensuring that the product or service purchased is delivered as promised. A team of three is even better. An investment in a company with just the founder is too high risk for investors. What if the founder gets hit by a bus a few weeks after the money is invested? Chances are it’s a write-off.
Observe the Proximity Rule: Focus on talking face-to-face with investors who work or reside within a 30 minute car commute from your operations. No one wants to have to drive more than hour to get to a meeting. An even bigger waste of time is going after investors who have to fly to see you. The reason for the proximity rule is that things do go wrong and when they do, meetings are called.
Stick to Investors in Your Industry: There’s no point to pitching an idea for a new bakery to a software executive or a CRM software deal to a someone in the vending machine business. You want investors who not only have first-hand industry knowledge but who have contacts that can help you.
Actions Speak Louder Than a Business Plan: Understand that the entrepreneurs who presents purchase orders to an investor and asks for an investment to meet rising demand by bona fide customers is going to trump anyone who just has an idea and a business plan. Yes, this does mean that you have to show some entrepreneurial ability to generate sales before investors cut you a check.
Business Plans? Meh!: Almost no one reads business plans and if they do they won’t take them seriously. Why? Because smart people understand that business plans are as objective as the typical profile on a dating site. This skepticism goes double for all sales projections.
Trust Takes Time: The majority of first time capital seekers are under the impression that investors will either cut a check at the end of the first meeting or within a week of it. In reality, investors take their time because there’s no rush at their end. What this means is that you will most likely meet monthly over three months or more to show the prospective investors that you are entrepreneurial enough to make progress without outside capital. If you have nothing to show at these other than a few edits to your business plan, you will be seen as a dud.
Be Flexible About How You Progress: Most successful startups bear little resemblance to their business plans a year later. This is because they were flexible enough to listen to and adapt to market feedback. In many cases, they used a transitional business model to establish a beachhead from which to expand later. In contrast, founders who are rigid about how things must proceed rarely get out of the starting blocks.
For Gosh Sakes, Learn Some Entrepreneurial Finance Already: There is nothing lamer than an entrepreneurial wannabe whose knowledge of finance is limited to “I can’t do a thing but sit on my keester until some stranger gives me money.”
Use Cash Floats: Learn how to create your own startup capital by massaging your cash inflows and outflows. It’s quite possible in the majority of instances to get your venture off the ground and fund your equipment, inventory, and working capital needs without needing more than a minimum amount of capital. This is especially true if the founder is flexible enough to utilize a transitional business model at the outset. Flexibility is a critical entrepreneurial trait. It’s found in almost all successful entrepreneurs. The killer is an inflexible rigid mindset.
Okay, that’s only nine not ten. I owe you one big time.
Come back next week.