Raising Capital: 4 Tactics to Raise Money for Your Business
Without the right amount of funding, even the smartest business idea can struggle to reach its full potential. Raising capital – whether in the form of loans, angel funding or venture capital – is a great way to free up cash to develop your business.
Are you struggling to raise enough capital to grow your business? Don’t worry. With the right combination of networking skills, business knowledge and experience, it’s easy to attract the attention of investors and raise funds to help your business grow.
In this guide, you’ll learn four simple but effective strategies for raising money that gives your business the ‘push’ it needs to be a success. Whether you’re raising your first angel funding or another venture round, read on to learn how to raise the cash your business needs to reach its full potential.
Do you want a proven template for raising capital for your business? Whether you operate an online startup or a local business, the techniques in our course, How to Raise Startup Capital, will help you attract early stage investors and secure cash for your business.
Seeking angel investors? Have a bulletproof business plan
Without a bulletproof business plan, you’ll struggle to attract attention from angel investors. In order to raise capital, your business plan needs to explain how you’ll generate income and why your business will succeed.
An elevator pitch will help you attract interest from investors, but it will rarely seal the deal. If you need cash to create a prototype or start working on your idea, make sure you have an excellent business plan before you start trying to raise capital.
A solid business plan is especially important if you don’t have a product ready yet to demonstrate to investors. Most investors are happy to take risks, but the risks they take are calculated risks where the upsides and downsides are known in advance.
Before you even think about raising capital, prepare an excellent business plan that leaves no doubt in the minds of your investors. A good business plan should include competitive analysis, long-term planning and a target market for your business.
Have you never written a business plan before? Learn the secrets of writing a great business plan that makes investors feel confident about funding your business with our Create a Damn Good Business Plan course.
Know why you need to raise capital and what it’s for
During the dot-com boom of the late 1990s, many online businesses raised capital purely because it seemed like a good idea. An alarming number of startups use the same strategy today, albeit with very different results.
Venture capitalists like to see two things in an investment opportunity: massive, exponential growth (either in userbase or revenue) and an understanding of why capital is important and what it will be used for.
If you’re seeking venture capital, it’s essential that you know why the funding is important for your business and how it will be spent. Will it go towards building new technology? Will it be used to put together a results-driven sales team?
Most businesses raise capital to fuel growth. If this is your goal, you need to have a deep understanding of how the capital will help you fuel growth. How much capital do you need to build your sales team? How many months will you be able to sustain your business with your funding goal and your current earnings and expenses?
What is your average cost per acquisition, and how will scaling your business affect it? What benefits will occupying a larger share of your market give you? How much will you need to spend on product development as your business grows?
In order to attract the attention of serious venture capitalists, you need to have the right answers to these questions. Knowing your goals isn’t enough – to raise capital, you need to understand how more money will help your business achieve its goals.
Do you need help finding investors and presenting a plan that shows them you’re serious about growing your business? Join more than 500 other entrepreneurs in Fundraising Bootcamp to learn how to raise capital for your business.
Before you raise capital, build a team of talented people
The first thing investors look at when assessing your company is its product and business model. Is it making money now? Can it make money in the future? What kind of long-term growth potential does it have and who are its competitors?
The second thing they look at is your team. Who is your company made of? What experience does your team have? Does anyone within your company have a track record of successful businesses, innovative products or fantastic ideas?
Before you try to raise money for your company, focus on building a team of great people that makes your application stand out to venture capitalists. A combination of talented management and engineers is essential for securing serious capital.
When you look at the most successful companies in Silicon Valley, many were crazy ideas run by proven people. Facebook built a team made up of Napster innovators, while Tesla was launched and funded by some of the minds behind PayPal.com.
Convincing talented, successful people to take a risk and join your company can be tough, and being persuasive and resourceful is essential. Join over 1,000 students and learn how to snag great talent for your company in our Startup Hiring course.
Don’t let your business become another ‘trash can application’
An alarming number of entrepreneurs think of investors like prospects. They use the same direct marketing tactics to target investors as they would to target new customers – cold calls, unsolicited emails, and the like.
While this might generate a small amount of interest from venture capitalists and angel investors that happen to read your emails, it often results in far more of your business plans and proposals ending up at the bottom of the office trash can.
Most investors aren’t interested in businesses that aren’t interested in them. When you contact investors, you need to reach out in a way that makes it clear you view them as someone you’d like to work with, not just a source of capital.
Instead of cold calling investors or sending them your business plan without any introduction, network your way in and meet investors through a mutual friend or referral that can ‘warm up’ the investor to your business idea.
This indirect approach might not produce the immediate results of a cold email or courageous phone call, but it’s a far more effective way to meet investors that offer useful advice and helpful guidance in addition to money.
Do you need help networking with potential investors? Learn how to meet people in your industry and develop a fantastic personal network using the techniques with How to Build an Awesome Professional Network now.
Take a strategic approach to raising capital today
When you carefully plan your approach, know your metrics and meet investors in a setting that lets you explain the growth potential of your business, you’ll find it far less challenging to get their attention and secure funding.
Do you need help finding investors that might be interested in your business? Read our blog post on the top angel investors to learn more about the type of people you should be reaching out to in order to raise capital and grow your business.
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