Opinions of contributing entrepreneurs are their own.
Raising money for a brand new startup idea can be challenging, especially in a tough economy. However, with the right approach and preparation, you can find the funding needed to realize your vision. Let’s take a look at some of the most effective methods and tools available to entrepreneurs looking to raise money to start their own new business.
Hold an “investors’ pitch”
An investor pitch is usually a PDF with a dozen slides. It tells a story about who the company is, the service or product they offer, the problem in that market and the solution your company offers. It also shows your company’s traction and includes more information about your team, your workforce projections, and the potential income an investor can get if they support your idea.
I recommend Eric Ries’ book ‘The Lean Startup’ to anyone starting a new business. It’s a good starting point to understand some of the essential terms you need to know, such as ‘minimum viable product’.
Related: 13 tips for delivering a pitch investors just can’t refuse
A business plan
There must be a strong business plan. Your business plan should concisely describe your concept, target market, revenue sources and expected financial results. A thorough explanation of how you intend to use the money raised to expand your business should also be included. Potential investors will be able to more easily understand your vision and develop confidence in your ability to execute it if you have a well-written business plan.
I often get asked, “how many years of forecasting should my business plan contain?”
My recommendation is to record at least five years. I usually pay close attention to the first three, and year numbers four and five can be a bit more ambiguous or focus on the bigger picture. Why? Because so many things are expected to happen in the first three years, years four and five are likely to feature changes, evolutions, or pivots.
Grow your network
The next critical step is networking and developing connections with potential investors. A wide variety of investors are likely to be available in any city, including venture capitalists, angel investors, and crowdfunding platforms. Even if not, you can return to virtual platforms to connect with them (think LinkedIn or Zoom meetings).
Get to know your connections and nurture those relationships. By making connections with potential investors, you can learn about their investment preferences and tailor your pitch to better meet their needs. Plus, you can get insightful critique and guidance on how to improve your business plan and increase the chances of getting funding.
When considering investors, I often tell them I’m looking for “strategic partnerships,” meaning I’m looking for an investor who not only provides capital, but also leverages their knowledge or connections to to advance our plans.
Related: Five Ways to Raise Money to Start Your Own Startup
Attend startup events
Startup events and pitch competitions are excellent places to meet potential investors and build relationships. Attend as many events as possible where investor interactions can take place. Get to know like-minded individuals who are also doing the same thing, and exchange ideas and what has worked for you.
Crowdsourcing platforms are another method of raising money. Through websites such as Kickstarter, Indiegogo or GoFundMe, crowdfunding enables entrepreneurs to raise money from many donors. Crowdfunding can be a great way to attract investors to your startup and build a network of people who share your vision.
Related: 6 steps to planning a free startup event and making a splash
Think outside the box
You can also apply for loans and grants from government or non-profit organizations for a more conventional strategy. Chances are the city where you live offers opportunities or services that can help you advance your business.
For example, the New York City Economic Development Corporation offers a variety of services and resources for entrepreneurs looking to establish or expand their businesses in the city. In addition, they offer Small Business Services (SBS), which facilitates access to financing and other resources for small businesses.
Consider all available options
Consider, for example, equity crowdfunding, which allows you to raise money in exchange for working capital. You can also think of starting your business, which means self-financing your start-up by reinvesting profits and reducing costs.
Preparing for different outcomes and being open to new opportunities is important because raising capital is a process. Not all startups raise the same amount or in the same way. My biggest piece of advice is to approach meetings with full knowledge and understanding of your business plan. Most importantly, approach all meetings with enthusiasm and positive energy. More often than not, investors invest in a team or an individual before they invest in an idea.