Raise Money for Business
Are you planning to raise money for business capital to accelerate your development or support your growth? If you have not worked in the financial sector, fundraising can seem like a complicated and potentially daunting exercise. Before starting this process, you just have to ask yourself the right questions.
All businesses need capital to grow
We explain the essentials in this article to help you determine if a fundraising is appropriate for your business, what you will need to put forward to convince investors and the keys to valuing your business and succeeding in your fundraising.
This is how you do it to accelerate your development or support your growth
Here are some questions and advice for you to raise money for business capital.
How to approach a fundraiser?
Fundraising cannot be approached lightly. It must calibrate the future needs of the company while respecting a very strict schedule.
This task is dense, time-consuming and above all pushes you to be at the top of your intellectual and relational abilities. Its impact on business and even on personal life can be harmful. The lack of time very often led the leaders to accept offers that constrained them. This is why its preparation sufficiently in advance makes the difference.
It should be kept in mind that many fundraisers cause financial difficulties for companies. Some have caused the bankruptcy of companies or breaches of shareholder pacts. Communication with investors is therefore vital. Your future investors must become your partners. Every element showing the success of your business must be communicated to them, this can only strengthen your relationship. It is therefore particularly important to think about the future legal status of your company after the fundraising, and in particular the shareholders’ agreement.
On the one hand, the investor must be fundamentally interested in the entrepreneur and his project, and on the other, the entrepreneur must be frank and transparent with the investor. To create a strong relationship with their investors, many entrepreneurs regularly exchange face-to-face with them (new products, analysis of metrics, etc.) and do not hesitate to consult them to get their opinions and benefit from their experiences.
Consult our overview of fundraising options to find out about the possible alternatives.
The prerequisites of fundraising
Fundraising must happen in the life of a company after the solicitation of “love money” (entourage, family, friends). or Thus, it is generally advisable to have exhausted its options for increasing equity before embarking on a fundraiser. Indeed, fundraising only occurs when the self-financing and indebtedness capacity is not sufficient to carry out the strategy.
An entrepreneur does not ask for money from investors for fun. Indeed, its need for cash must be integrated into a growth plan with defined objectives for various reasons:
Strengthen its technological positioning
Accelerate growth and customer acquisition in a competitive market
Launch a new product
Go international
During fundraising, proof of concept will be requested. This can be income via turnover or even the number of users of its solution. The financial aspect and in particular the return on investment must be considered from the start. On them depend the very foundations of the project. After these concerns, fundraising should always come second.
Fundraising: what are the key indicators to highlight?
Too often business plans are confined to “classic” indicators such as equity, high and
bottom of balance sheet, EBITDA etc. But taking into consideration the number of funding requests received, it is easily understandable that the time spent by the analyzes on the reading of a file rarely exceeds 15 minutes.
This is why you have to adapt your language to each interlocutor. By highlighting Key Performance Indicators essential to your sector is particularly important in order to raise money for business capital.
Example: what indicators should be put forward for a B2B or B2C company for fundraising?
For a B2C Internet company, Key Performance Indicators (KPIs) can correspond to captured users.
For a B2B company, the signing of the first contracts will be vital in order to gain credibility with investors.
A financier will never invest solely on the basis of a PowerPoint and the speeches of inspired entrepreneurs. He will need solid indicators that he can trust and that he can use to convince his other partners because yes, the final decisions are made in committees.
Our company, can help entrepreneurs make your business plans, has explored the subject of fundraising. If you want to know more about this complex process and be accompanied by experts, we invite you to look at the offers they offer!
How to Get Funding for Your Company | Fundraising: All the Steps for Raising Capital
How to valorize your business?
The search for potential investors is always an emotionally intense moment for an entrepreneur wishing to enhance his business.
Focus on people
Before analyzing any value proposition or market studies ensuring potential returns on investment, an investor will first look at the team that makes up this company. That is to say the skills and experiences of individuals but also their personality.
The current can only pass after numerous meetings and exchanges with these potential investors. This step is vital. An investor seeks above all personalities with skills because he knows that the success of his investment will depend on the temperaments on which he invests: he seeks consistency and complementarity of personalities and skills.
Seeking traction is only possible with personalities who can open up to the skills of others.
Impress
A meeting with an investor is an opportunity to impress them on your company.
This goes through several explosive ingredients. You must first of all carry a promise: you bring him good news about your ability to impact a market or one of its sectors. He must be able to imagine the consumer’s interest in this new solution.
But this new promise materialized by a new solution is not enough. It must be imbued with an ideal that is unique to you. This ideal must be radical and must bring your first users to adhere to your vision of the world.
Proposing an ideal of life through the product or service of your company is perhaps one of the greatest strengths in guaranteeing over the long term.
To know
You have to be able to differentiate yourself from other people who may be in the same market. Standing out from the competition does not necessarily mean finding a comparative advantage like a large company could (playing on costs or quality) but proposing an offer that breathes new life into it.
This new solution will have to demonstrate the potential for change it contains and its ability to materialize in the future…
Your offer should help solve problems (time savings, cost optimization, better ergonomics, etc.) The investor should be able to perceive this innovative solution and judge for himself the value proposition for the acquirer.
A good knowledge of the market is an important point that the entrepreneur must acquire. It is becoming more and more difficult to become legitimate by launching a business in a sector that you only know through market studies and partial information of this kind.
These data are not exhaustive and do not include all the keys and reading grids to understand a market (tacit rules, games and interests of actors to integrate your solutions)…
To perfect your knowledge of the market, whether in BtB or BtC, having worked in the sector allows better access to information and sharpens the ability to activate the appropriate network.
To reassure
It’s important to reassure an investor of the actions you want to take to arrive at a beginning of traction or improve the scalabity. These actions go through marketing, commercial and communication plans.
The important thing is to transcribe the results obtained thanks to your metrics.
The use of performance indicators requires a great capacity for abstraction and grounding in reality to solve concrete problems.
The objective of an investor is to obtain future financial performance: he will therefore always tend to minimize the valuation of the company in order to obtain the greatest difference between his investment and the value of the latter when he withdraw capital from the business.
When is the best time to raise funds?
Raising funds can take between 6 and 9 months, and up to 1 year. But the most promising months to start looking for investors are the back-to-school months: September and January.
Regarding the management of your company, the best timing to carry out this fundraising is between the moment when your product has entered into adequacy with your market (product market fit) and the moment when growth begins to take off.
Before that an investor will not be interested and it will be necessary to turn to other sources of financing.
Fundraising should be considered when you need to accelerate your growth and technology. If this idea of hyper growth is not the main objective of the lift, it is better to leave it aside and focus on improving its metrics to come back afterwards.
Power point presentations for fundraising
To show investors your performance in order to raise money for business and the ways you plan to improve it, it is important to provide them with a clear and precise pitch deck. Investors need to know that you have a long-term view of the investments and changes you will need to make as the startup grows.
This Powerpoint document, containing a maximum of ten slides, is essential to put the odds on your side for your fundraising. It must contain the following information:
- Value proposition and your vision
- Solving a problem
- Target market and opportunities
- Proposed solution
- Business model or revenue capture
- Traction & Validation of your plan (Roadmap)
- Sales, marketing and communication strategy
- Team
- Financial modeling for the next few years
- Competition and similar offers
- Investment and use of funds
Possible Options of Raising Money For Business | What are They?
Sources: Harvard Business School, Intrepid Private Capital Group
Photo credit: QuinceCreative via Pixabay
