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How to Raise Money in 2012

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Every year for the past decade I have heard the same thing, regardless of whether the economy is doing well or poorly.     

And what I hear is entrepreneurs saying that it's so hard to raise money.      

Importantly, whether times are good or bad, the process of raising money is pretty much the same. And whether times are good or bad, the challenge of raising money is still the same. That's because when times are good, there are more entrepreneurs seeking funding. When times are bad, funding sources are a little tighter with their money, but fewer entrepreneurs are contacting them. So, it all evens out.     

So, how should you go about raising money in 2012?

Here are six rules to follow:

1. Bootstrap as much as you can. Bootstrapping is the process of running your business with no outside financing. While you clearly can't accomplish as much as if you had outside funds, bootstrapping forces you to get creative and to figure out how to do more with less funds. Importantly, when you bootstrap, you can 1) start to prove that your business will be viable, and 2) prove that you can execute on your venture. Both of these will help you significantly later when you do seek outside funding.

2. Start by raising smaller amounts of funding. No one is going to write you a $5 million or $10 million check for your business until you've proven your concept. Bootstrapping will help progress your business; but also figure out the smallest amount of funding you could use to progress your business further and raise that amount. Once you raise the smaller amounts of money, and start growing your venture, the larger amounts of money will become much easier to raise.

3. Determine the right sources of funding for now. This is the area that trips up most entrepreneurs. For example, if you're not a technology company and you haven't already proven your concept, venture capital is probably not right for you. But that's ok, since there are tons of other forms of funding that can be a great fit (e.g., angel funding, crowdfunding, vendor financing, etc.). So you must understand all the funding sources that are available to you, and go after the ones that are most applicable.

4. Develop relationships now.  Sure, you are most likely to raise funding if you have a quality product/service that has real growth potential. But, even more importantly, you will attract funding if the funding source likes you and your management team. Because investors and lenders bet on people; even a great product or service won't make it unless it's backed by a quality management team.

So, start building relationships with funding sources now. For example, even if your company may not be ready for venture capital for another 12 months, start meeting with venture capitalists now. These relationships will not only make you much more likely to raise the funding later, but these contacts may be able to introduce you to other funding sources.

5. Develop your business plan and keep it up-to-date. Your business and your business plan are always changing. You need to start now by documenting your vision in the plan. The process of developing your plan will force you to think through your business. It will identify new opportunities. And it will give you ideas on how much you might be able to accomplish via bootstrapping and/or smaller funding amounts (numbers 1 and 2 above).

Keep adding and updating to your business plan so that when you meet an interested investor, you can quickly and easily get your plan to them.

6. Keep your eyes and ears open and network. You never know who will ultimately fund your business. So the more people you meet the better. The more people you tell about your business the better. The more events you attend the better. The more Advisors you attract the better. And so on. You need to constantly get the word out about your venture to the right people to find the ones who will fund you. And when you meet someone who is not the right fit, don't forget to ask for referrals. Since they might just know the perfect investor for you.

Suggested Resource: Want funding for your business? Then check out our Truth About Funding program to learn how you can access the 41 sources of funding available to entrepreneurs like you. Click here to learn more.


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