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| Tips For Raising Capital |
Why do we have the notion that capital raising is a
challenging task?
Of course, it is challenging but what makes it so? There
must be certain area that the entrepreneurs often fail to understand and that’s
where they get stuck up even after months of preparation. No worries, today we
will discuss a few simple tips that will go a long way in helping the
entrepreneurs to raise capital successfully.
So all you entrepreneurs out there, read carefully the below
mentioned tips and try to analyze what all went wrong during your last fund
raising campaign. Often, a minor negligence can put you into trouble, so make
sure this time you don’t disappoint the investors. And, if it is the first time
you are raising capital, you are lucky enough.
Tips For Raising
Capital
Understand Your
Business Well
Understanding your business is the most crucial task. Until
and unless you know your business well, you cannot demonstrate anything in
front of the investors. Despite knowing your business, there are chances that
you may fail to articulate everything in front of the investors. Now, these professional
guys will only invest when you are able to show them your operations, objectives
and vision in complete facts in figures. For this, first you have to determine
the value of your startup. Business valuation is a great way to determine the worth
of your company based on which you can ask for the capital.
Be Realistic About
When And How Much Money You Need
Starting a new business does not necessarily mean that you
have to jump into fund-raising right from the seed-stage. Knowing when exactly
you need to raise capital is very important. It is best if you fund the business
from your personal savings, at least 10 to 25%. It will help you gain the investors’
trust and convince them more easily for the investment when you really need it.
Also, asking unrealistic amount from the investors is also
not going to help you either. You may think that asking less than what is
required will make you appear more confident but the fact is, you should
determine your borrowing needs keeping in mind the worst possible time and not
the best. Raising less capital may lead your business to collapse during
extreme crisis. It is absolutely ok to
ask more if it is realistic.
Get Everything Ready
I wish every entrepreneur knew how critical the preparation
is for equity capital raising. You have to make sure right from the beginning
that you are equipped with all that is needed to raise capital successfully. From
having a unique business plan targeting a sizable market to getting your first
pitch ready, everything will together determine whether you will be able to satisfy
the investors or not. Your first pitch should be aimed at raising curiosity in
the investors about your business. It is very important to get them hooked and once
you do it, you know you have achieved 50% of it.
Show Customer
Validation And Traction
Where there are customers, investors will automatically come
in, so before you approach the investors try to gather a group of customers who
believe that your product or service has a genuine requirement in the market and
currently there is no other alternative to it. If you can gather a group of
beta customers for demonstrating customer validation, your investors are definitely
going to give it a thought.
Hire A Trusted
Venture Lawyer
The terms and conditions in the VC industry keep changing
and a venture lawyer can only provide you with the best guidance to deal with
the situation. As an entrepreneur, you may need to raise capital two or three
times in your life, so having a reliable lawyer by your side will help you get
a good deal.
Find The Right
Investor
Make sure you do not chase the wrong investor while looking
for one. Wrong investors are those who are interested in an industry totally
different from yours. If yours is a tech startup and you are chasing an
investor who is interested in the energy sector, you are simply wasting your
time. Each second is valuable for you so spend it wisely.
Conclusion
From all other types of capital raising methods, venture
capital raising is the toughest and the most crucial one. While it is the only
source that can offer you the maximum amount of money, it is also true that
convincing a VC can be the hardest exam you have ever appeared. I hope you find
the above points valuable and helpful. For more tips for raising capital, you
can visit http://mergeralpha.com/.
Good Luck!
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