Persisting Through a Capital Raise

Print
 

 

Raising funding for your company is challenging. This is particularly true if your company is new and doesn’t have assets or an operating history. In fact, the vast majority of new companies fail to raise capital, and as a result, never fully launch.

The first step to funding is to prepare your business plan. Please feel free to use our for-profit business plan template or nonprofit business plan template to help with this effort.

Armed with your business plan, you’re ready to raise funding. Below, I detail the experience and lessons learned from a new company for which I helped raise several million dollars, to help your business successful raise money if and when needed.

Go After the Right Sources of Funding

The first key to raising funding is to pursue the right sources of funding at the right time. There are numerous forms of funding from which you can potentially choose: bank loans, credit cards, angel investors, venture capitalist, crowdfunding, etc.

Each funding source has different criteria. For example, to receive a bank loan you generally need a 3-year operating history. And to raise venture capital, you typically need to have already proved your concept and have the ability to scale rapidly.

No matter how interesting your company, or how amazing its growth potential, if you pursue a funding source for which you don’t meet the criteria, you will fail.

For my client, which was seeking venture capital, we initially failed to raise venture capital since we didn’t have proof of concept. So, we raised money from angel investors, used it to prove the concept, and then pursued and successfully raised funding from venture capitalists.

It’s Nearly Always a Numbers Game

Even when you have a great product at a great price, success in sales is a numbers game. That is, you still need to present your product to many potential buyers before one purchases.

The same is true with raising funding. No matter how great your company is, most investors will reject you. Even the mighty Google was rejected by multiple venture capital firms when it first approached them.

You must be willing to present your company to many prospects, be it multiple banks, angel investors, venture capital firms and so on. The majority of presentations will result in rejection. You just need one yes to be successful.

In my client’s case, we reached out to 118 venture capitalists. Forty-seven of them requested more information via email. We gave in-person or virtual presentations to fourteen of them. And one ultimately funded the company.

It Takes Time

In my client’s case, the entire funding process took just nearly 2 years. It took approximately 6 months to create a business plan and raising money from angel investors. This money was then used over an 8 month period to build technology to prove the client’s concept. Then, it took an additional 9 months to raise venture capital.

You Must Have a Clear Value Proposition

When we first started presenting to investors, my client explained itself as a MEMS company. You know what a MEMS company is, right? Of course you don’t, and neither did investors.

Likewise, explaining what MEMS stands for, micro-electro-mechanical-systems, didn’t help.

It was only when we focused on the benefits and applications of the MEMS technology (such as its use in improving the range of telecommunications equipment) and how the company had an advantage in the space, did investors get excited and write us a check.

Yes, You Can Ultimately Raise Money For Your Business

While not easy, most entrepreneurs and business owners can raising funding. You need to have thick skin as you’ll face a lot of rejection. You need to be patient as it will take time. You need to focus on the types of funding sources that are fit for your business. And you need to make sure you can clearly articulate the value of your company.

The good news is that if you can assemble each of these pieces, funding will be yours.  

Categories:
 
Share this article:


Get a Free Consultation
with a Growthink Expert

Click Here