There are many different ways you can raise capital for your start-up, but they primarily split into 2 categories. You’re either investing your own money, or someone else’s. We’re going to be focusing mostly on the latter, however if you are funding your startup with your own cash, continue to read on, there may be some useful information here for you.
The Business Plan
The first thing you did when the idea for your startup popped into your head was write it down, right? This was your first draft at your business plan. As you continued to work through the idea, you added more and more detail each time. This is key to, not only raising capital, but also to setting the foundations for a strong and successful future business venture.
Know What You’re Selling
I have encountered numerous entrepreneurs that have great ideas, but it takes them hours to explain it. ‘The idea is this, but it also does this…no wait, it does this’. How many times do you think investors hear that? It’s a definite turn off. If you don’t know exactly what you’re selling, then how is anyone else supposed to? It’s simple, highlight the problem and provide the solution.
Know Your Market
It’s great to have ambition, but Rome wasn’t built in a day. You cannot enter the market wanting to sell to everyone, it’s impossible. Clearly identify who you want to sell to. Who will benefit from your product the most? Who is going to be the easiest type of person to sell to? This is your avatar. This is who you’ll be aiming all your initial efforts towards.
An example of an avatar for a wedding shop could be; professional women, aged 25-35, engaged, with a household income slightly above the national average, no children, works 9-5, attends gym classes with friends, spends a lot of time on Facebook, reads bridal magazines & blogs and enjoys socializing and going out for food.
With that avatar you know how, where and what to market to your ideal customer. If you’re unable to create this then go back to your business plan, ensure you have 100% clarity on what you’re offering and the rest should fall into place.
Know Your Industry
You need to know at least, the latest trends and what your competitors are providing in order to stand a fighting chance. If you’re building an online blackjack site, then are physical casinos still your competitor? Or are other websites your competitors?
If your customer knows more about what’s going on than you, then you’re in trouble. When you last bought yourself a car, who had all the product knowledge? And this helped you trust the salesman right? The same goes for whatever industry your startup may fall into. Become an expert in your field. It’ll also help you when it comes to selling.
Which brings us nicely onto the next point. Competitors. In order to be successful, you need to sell. Sell as much as you can. The more you sell, the more success you will see. Your competitors also know this, so they’re going to try and get as many sales as possible. Look at what they’re doing to attract customers, where are they marketing? What are the costs involved? The great thing about having successful competitors, is you have a mentor. You have proof that your startup can be successful.
Secure Your Financials
When approaching investors, they only want to know one thing. Will I make money? That’s all. They want to know their investment is in safe hands. The best way to show them this is by taking care of your own money as if it were theirs. You wouldn’t want your money in the hands of someone irresponsible, so why would they?
Show off your projections. A realistic projection is far more attractive than crazy huge numbers. Whilst you might think six zeros looks great on your first 12 month projection, potential investors may see it as overreaching and unrealistic, which will have them turning their backs.
Perfect The Pitch
Once you have all the information above clearly outlined, write it down into an easily manageable script. Be sure to put it into your own words, no one is interested in talking to a robot. This pitch is going to be the difference between yes and no. Be sure to include all the vital information, but keep it to just that. Avoid cheesy ice breakers and jokes, you’re there to do business, let the jokes come after the yes. Too long and they’ll lose interest, too short and they’ll think you’re missing something.
Practice the pitch to friends, family, co-workers or just anyone that will listen. This will give you a good feel for how your startup is going to be received by your potential customers.