Funding the Business
Fund raising, especially for a start-up takes time and effort. To remain focused, the business should develop a fund raising strategy that it can follow systematically.
Some of the key steps include:
a) Determining how much is needed
b) Identifying potential investors or investor types
c) Have a winning pitch deck that outlines the business concept, market potential, differentiators/value propositions; market data; growth potential; the problem being addressed; potential return for investors.; high level financial projections; an execution plan; and, the investment “ask”.
Potential funding sources are often investors and lenders.
Investors may be Angel Investors; Venture Capitalists; Friends and Family; Personal Savings; Online funding platforms; Grants; Potential Customers; etc.
Loans usually require either or both collateral and guarantors. Lenders can be banks, government programs such as SBA or investor groups. Investor groups may want loans structured as convertible to equity.
Build a list of target sources and use the first couple as opportunities to learn about investor and lender expectations. Even a rejection can help refine the pitch and expectations.
In most cases, the magic elixir is active networking. Consider each connection a learning opportunity.
Once the pitch deck generates interest, the prospective funding source will require a business plan. Next they will likely want to perform some due diligence which requires detailed financial statements, legal documents, proof of concept, etc.
Having these ready to go on request shows that your business and leadership team have solid management and governance skills.
Then its time to negotiate financing or lending terms, which often include reporting, covenants and potentially some involvement before moving to close the deal.