As an entrepreneur, start-up founder
or company owner, it's very likely the thought of raising finance from a place
other than a bank to grow your business has crossed your mind. Not only crossed
it, but taken up a large portion of your time as well.
If you have seriously looked into raising finance chances are you've also felt overwhelmed by the process.
There's so much to consider and
understand - and so much phrasing that can have a dual purpose or be
interpreted differently - it can lead many entrepreneurs to switch off before they've even
taken the first step.
Take the phrase 'first round of funding’ as an example. It's often thought that
this means funding that's restricted purely to early stage businesses.
The reality is it covers the first
round of funding which has involved selling shares to external investors, as
opposed to being self funded, family funded or funded through more traditional
methods such as bank loans and overdrafts.
With so much to understand, I thought
it would be useful to create a series of blogs on the raising finance journey -
and I’m starting at the very beginning of the process.
Ask yourself: are you ready for investment?
One of the biggest mistakes an entrepreneur can
make at the outset of any business venture is starting to raise equity-based
funding and investment far too early in the process.
During my 6 years at Angels Den we saw hundreds if not
thousands of very early stage business plans that were nothing more than an
idea.
Launching a funding round before getting sales, traction
or progress and with just a business plan are in place, won’t entice investors
to your offer.
It doesn't matter how good of an idea or concept it may
be, if you can't prove it works by making sales to anyone other than your
mother, it's going to be really difficult to convince investors to part with
their money.
What's more, going for funding too early can make
potential investors for future rounds more than a little wary, and potentially
lead to a non-closed or part funded round.
These points alone can easily give people the wrong
impression of your business, potentially at the very outset of your funding
journey.
You need to be able to prove your business actually works
It is worthwhile understanding that although the above is
generally the rule of thumb, it's not always the case that investors won't
invest unless there's clear traction in the business.
In some instances, investors will buy into a concept
before there's any tangible business data to report on.
However, these instances are very few and far between
(investors are often investing in just an idea, and the previous successes of
the entrepreneur) and are often reserved for scenarios where a well-known
entrepreneur with a concrete track-record has a clear vision.
Ready to move forward?
So with this understanding, how confident do you feel
that your business or concept is at a stage where gaining funding is a serious
prospect?
If the answer is that if you feel you are ready, and have
the sales proof to quantify your belief, that's the first and most difficult question
answered.
But with there being various different funding stages for
businesses to utilise, next blog item is understanding what the stages are, how
they differ and which your business is most suited to at present.
No comments:
Post a Comment