Positioning your company to raise capital
Raising capital can be a long and arduous process. What can you do to make that process go as smoothly as possible? First, make sure you have your pitch in great shape. Your pitch needs to be in more than one form, too. You should have an “elevator pitch”—a 30-second story about what your company does and why your business is compelling. Sometimes that’s as long as you will get to tell your story to someone, so you need to get potential investors interested enough to want to hear more.
You also need to have a strong executive summary and full-blown pitch (typically including a slide deck presentation). Although more detailed and thorough, these longer pitches need to be as compelling as your elevator pitch. Every pitch is different, but some of the more important components of most pitches will show some or all of the following:
- There is a large and compelling market for your business. You might have a great idea, but if the market it too small investors won’t be interested.
- Even if there are current solutions in the market, they are failing to meet the market’s needs. Describe your potential customers. Why does the market need a better solution?
- Your company’s solution is different and better. It will solve the needs of the market and the problems your customers need solved in a compelling way—it’s cheaper, faster, better and/or materially different. Customers (and lots of them) will want your solution!
- Where true, the intellectual property in your solution will protect your eventual position in the market. This is very important is some businesses like most life sciences companies, hardware businesses, etc. In other cases, like many consumer Internet businesses, intellectual property protection may be less important or available. In those cases, you may need to show that you have a compelling marketing plan to help you gain rapid and viral growth or that you have already demonstrated some significant customer traction.
- A summary set of realistic financial over the next few years that shows that you expect your company will scale to become a sizable company.
- A summary of your team and the expertise it has relevant to making your company a success.
Second, you need to have developed a financial plan so that you know how much capital you need to raise. If you only need $100,000 to start, you may be able to tap friends, family and other investors, but if you need $5 million you are going to need to target venture capitalists and other . Without a base financial plan, you are likely to waste time talking to the wrong types of investors.
Raising capital is often very time-consuming. Be patient and be persistent. Tap into the networks of your advisors, and work with them to help develop a strategy for reaching out to potential investors. Be a good listener and update your pitch and your approach based on the feedback you receive. If you believe in your story, don’t give up.