Raising money for your business
Is it time to raise money for your business? In this article, you'll learn when to get investors and business pitch techniques that will increase your chances of getting funded.
Let's face it, having sufficient funds to build your business is one of the key components to success.
Finding investors and raising money for your business isn't necessarily that difficult – but the question is whether or not you're ready to receive investment.
The first thing people think about when becoming an entrepreneur is where to get funding. This is not necessarily wrong, but one should ask themself a few important questions first.
Far from all businesses get funded. In fact, this study reports that 77% of small business owners used personal savings to start their business.
So you don't necessarily need to get investors to start a business, but if you are looking to raise money, let's at least do it right.
Before we talk about how to pitch and where to get investors, let's just make sure you understand why it could be detrimental for your business to raise money too early.
Why you shouldn't raise money too early
I'm not a big fan of raising money too early in a new business.
Sure, raising money can help scale your business faster.
But if liquidity is not a bottleneck (but rather you need to develop better ideas, systems, and processes), you shouldn't go out and raise money just because you can.
If your business is not ready for growth, for any reason, then throwing money at the problem could just cover up fundamental flaws in your model. Later on, this could cause problems and you won't understand why.
Scaling a business without having a strong foundation is not a smart thing to do.
Before you raise funds for your company, make sure your business runs smoothly.
When to raise funds for your business
- You have a proven business model that works.
- You have set up processes and systems that run like clockwork.
- Once cash becomes a bottleneck.
How to pitch – 10 business pitch techniques
To get people (especially investors) to believe in your business enough to want to invest their money, you need to learn how to pitch.
When you want to raise money, not only do you need a lot of confidence in your idea, but more importantly, you need to make other people confident about it.
That requires some thought. Getting enough clarity to make it possible for you to make that vision clear for other people is vital.
Tips on how to pitch successfully:
1. Make your USP clear
We discussed USP at length earlier in this blog series, and this is another reason why it's so important to clearly define your USP.
Make it absolutely clear what problem you're solving, how you're doing it better than your competitors, and why that equals long-term profits for investors.
2. Dress well
Yes, it really matters.
Neil Patel did an experiment and said his success rate for pitching ideas increased more than 35% by dressing well.
Subconsciously, you'll attract higher trust and respect by looking professional.
3. Use real data
You can't sell investors on dreams.
Investors prefer to see realistic expectations rather than optimistic dreams. Present data that makes sense, otherwise they'll run for the hills – even if the rest of your business pitch is solid.
Avoid overselling in general.
4. Research the investors
An important pitch technique is to know the people you're going to present to.
People are looking for different things when deciding whether to invest in you or not, so know who you're presenting for and what is the most important thing for them.
Some investors really care about having a marketing plan, others care more about nailing the product. A little bit of research can go a long way.
5. Keep it short and focused
Investors really do care about their time. Keep your pitch short and sweet. Stay focused and don't digress too much.
Aim to keep your pitch under 10 minutes. You don't have to cover every single aspect of your business, just enough to make them curious. They'll ask for more information if they are interested.
6. Clarify the revenue model
Without being too long-winded, you need to be able to explain exactly how you're going to monetize your product and make money for your investors.
7. Define your target audience
Another key point is clarifying who you're selling to. Defining your target audience in a concise way will help your investors believe in your revenue model.
8. Map out a marketing plan
What's your strategy to get customers to actually buy your products? Again, showing them the whole funnel will increase their belief in your business model.
9. Prepare for questions
If you nail the initial pitch, they'll most likely ask you a bunch of questions (kind of like a second test). If you're able to respond well to these questions, you're more likely to get funded.
10. Be highly passionate
Some investors care about your own enthusiasm and belief in what you're doing. If you can show them that you're really passionate about what you do, you'll win a few extra points.
11. Rehearse your pitch
We all get nervous occasionally, and pitching to investors can sometimes feel a bit intimidating.
If you rehearse your pitch enough times, you won't have to worry about forgetting something or making a mistake.
Where to raise money
Learning how to pitch is one thing, but there are other ways to raise funds for your business.
Here's a list of different methods you can use to get funds.
1. Go to venture capitalists
Professional investors are always on the hunt for new startups and might fund you if they can see the profit potential.
2. Bootstrap – use your own money
Always consider paying for your venture with your own money first. You get to keep full shares and can probably get started faster.
3. Apply for a governmental grant
Check if you are eligible for a government grant – many governments offer this to encourage new businesses and support entrepreneurship.
4. Use crowdfunding platforms
Crowdfunding is a great way to get funds for your startup. It's basically many small loans from different people combined into one. There are many crowdfunding platforms that help you raise money, including:
- GoFundMe (great for individuals)
- Patreon (great for content creators)
- Kickstarter (great for all business types)
- GoGetFunding (great for non and for-profit causes)
5. Find an angel investor
Many successful entrepreneurs and individuals out there are looking for better returns than traditional investments and might want to invest in your business. Ask colleagues and people in the industry if they know someone who is looking for an investment opportunity.
6. Get a credit card for short term expenses
Although I don't personally recommend using credit cards to fund your business, it is an option. Rates can be fairly low if you have a good credit score and always pay back on time.
7. Apply for a micro loan
There are several organizations (Kiva is my personal favorite) out there operating worldwide that provide microloans for entrepreneurs. Not everyone is eligible so check this out first.
8. Ask family or friends to invest
It's not always the best idea to mix family and money, but if you have family or friends looking to invest and well aware of the risks, it shouldn't be excluded as an option.Mark lesson complete