It’s not as they say. Coming up with an idea is easy. Persuading people and businesses to fund it is the hard part. Lucky for you, we live in a day and age where there are multiple outlets for you to fund your business. It’s all a matter of finding the right approach.

It’s important to weigh out all of your options. Don’t fall into the trap of thinking there is a universal “best approach” in order to raise capital. It goes without saying that each option has its pros and cons. It’s your job to seek out what you bring to the table and how that translates into seeking an investment. Investors expect for you to be able to carry out the plan you propose to them. Investors aren’t just investing in your business, they are investing in your ability as an entrepreneur.

 

Do’s:

1. Know Your Risk

Some entrepreneurs are so enamored by their idea that they forget to consider the possibility of their business failing. Before they know it, the resources they have garnered from friends and family have dissipated, and they are left only with broken personal relationships and a heap of debt.

There is a way to safely get your friends and family involved. Many crowdfunding platforms offer a debt-based campaign whereby your family and friends can make structured loans. This type of loan allows for not only yourself but also your friends and family to sleep a little more deeply at night, knowing that if your business does fail, you will be able to repay the loan on time.

2. Know Your Business

Investors expect you to be familiar with the ins and outs of your business. There is nothing more unsettling to an investor than an unprepared pitch. When you meet with investors, you will need to first explain your understanding of your market and how your brand fits into it. Tell them how you plan to reach your target consumer and how you will differentiate yourself from your competitor. You need to think through possible questions your investors might have and how you are going to answer them.

  • What’s your business model?
  • Who are your competitors?
  • What differentiates you from them?
  • How are you going to get ahead?
  • Why do you need the money?

3. Sell Your Story

Investors recognize the value of a story. People want to invest in a product or service that will have an impact on the world. Explain to investors why you started your business and why you are the person to make your idea successful. People take for granted the value that this can add, not only for persuading investors but in growing your business. Consumers are much more likely to buy a product or service if it has a story that resonates with them, and investors know this.

 

Don’ts:

1. Don’t Try To Reach Your Goal All At Once

If you choose to raise your goal through crowdfunding and you’ve never run a campaign before, don’t try to raise your entire funding goal in one campaign. Instead, raise what you need as you go. Identify how much capital you need to take your business to the next level. When you get there, update your contributors and begin planning out your next campaign. If the people who have contributed to your past campaigns see measurable progress, they will fund your campaign again.

Many people feel that their campaign needs to be perfect. As you begin to test out your market on crowdfunding platforms such as Kickstarter or GoFundMe, you will want to adjust your idea according to the feedback you receive on features, price, etc. It is through this trial and error process that you will not only learn what makes a successful crowdfunding campaign but also what it is going to take in order to grow your business.

2. Don’t Forget About Interest

When you are setting your campaign goal, keep in mind the fact that 5-10% of the money that you raise will go to the crowdfunding portal you choose. Also, don’t make the mistake of creating your own portal. Although it may seem like it would be a good idea to save yourself the fee and create your own, crowdfunding platforms like the aforementioned Kickstarter and GoFundMe are registered with the SEC and are required to comply with federal laws. It’s a lot easier to just pay the fee.

3. Don’t Make Money Your Campaign Theme

Don’t make your campaign about the money. Though it might seem obvious, there are many entrepreneurs that revolve their campaign around money. Asking for money sends the wrong message. The most effective campaigns sell value, and the impact that value will have. If you have created a safer way for people to lock their bikes, don’t say you want money to build bike locks; sell the impact it will have in creating safer neighborhoods etc.

4. Don’t Expect The Money To Just “Roll In”

You may think you have the best idea ever, but if you don’t take fundraising as seriously as you take growing your business, you’ll be in for a surprise. You need to act as though your campaign is your product, and you must spread it anywhere you can. Create a link to your campaign on every piece of your content, your website, etc., where people can contribute to your goal.

Don’t get discouraged if the first method of funding you try doesn’t work. Every business has to find its own method of funding; it may even end up that you create an entirely new method of funding. No matter which method you choose, always keep the end goal in mind. There’s nothing more heartbreaking than to see a hard-working entrepreneur sell the majority of his equity in his company in the beginning stages, and then end up having the company acquired in the future.

By | 2017-05-16T14:47:33-07:00 April 12th, 2017|Startup 101|