March 9, 2012 | 4-minute read (737 words)
Well, the good news (and the bad news) is that there really are no tricks to raising investment capital for your business. Raising capital requires preparation, persistence and diligence. Before you begin, make sure that you are well organized. Once you start meeting with investors you need to be on the ball to be able to respond quickly to their requests and questions. If you’ve got a solid business plan and tested prototype there are only a few simple things you need to do to stand out above the crowd.
How to Raise Investment Capital
1. Do your research and narrow the field.
Make sure you are meeting with the right investors. After a lot of effort has been made and time spent is not a good time to find out a simple fact that could have made clear early on that this was a dead end. Especially if that simple fact could have been easily found on a Google search. And even worse, if your contact knows someone that could be helpful to you but you’ve demonstrated yourself to be sloppy you will certainly miss out on an important connection. The strategy of pitching often and pitching everyone is a good one for general networking, but when making serious pitches be sure that you know your guy. Do your homework. Be prepared. Investors want to know that you’re someone that cannot easily be surprised.
2. Listen carefully.
You should note all of the feedback you get and be sure to give it the thought and the response it deserves. Objections and criticisms can be very helpful in sharpening your presentation and alerting you to any weaknesses in your plan. Listen carefully to what investors are asking you for and provide it to them. There is often a level of subtlety involved. Investors are looking for keen listeners, someone who can really hear what it is they are asking about. They want someone who can understand all of the implications, and connect the dots. Oftentimes, it is less about what you say then what you hear, and then what you do with that. Some people can become so focused on their outgoing message that they seem unable to listen or to have a dialogue. You should know your material well enough to be able to relax and engage in a conversation.
3. Be timely and responsive.
This cannot be overstated. Investors are skittish enough, and very sensitive to any sign of unreliability. Your dealings with them will show how thoughtfully and intentionally you will handle your business—and their money. An investor’s time is money to him, so handle it just as carefully.
4. Build relationships.
People give money to someone they have a relationship with. Though your relationships with an investor will be a professional one, it is still a relationship, and one of profound trust. To earn investment capital, you first need to earn the trust of investors.
Set goals and accomplish them. Do what you say you’re going to do. The most important thing to demonstrate, the uber-coolness of your product aside, is how you are going to make money. Even in the early stages you should have some idea about this. If you can’t demonstrate how you’re going to be making money, you have some more work to do.
And there you have it. Our clients who have been successful at raising the money they need all tell us the same thing: Be persistent and consistent. Stay on the radar, but don’t be a nuisance and don’t burn any bridges. Be respectful, polite and cultivate all of your contacts. Raising money requires a strategic, concentrated effort. You will very shortly come to know the investment landscape as well as your market.
Do you have any "tricks" for raising funds? Tell us about it in comments below or contact Early Growth Financial Services.
David Ehrenberg is the founder and CEO of Early Growth Financial Services, a financial services firm providing a complete suite of financial and accounting services to companies at every stage of the development process. He's a financial expert and startup mentor, whose passion is helping businesses focus on what they do best. Follow David @EarlyGrowthFS.