It’s hard to raise money at present, but you’ll just have to grow a thick skin and take it on the chin – and above all, persist!
Yesterday I met with a start-up company looking for just over $4 million. They are at “proof of concept” stage and are trying to break into large corporate markets. This is a tough one.
In this environment it is hard to raise money, even for companies that are already in the market generating revenue. A start up is going to find it really hard. Their company has no credibility (even though the founders are well known for their expertise).
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Large corporate customers will have serious concerns about:
- Are you going to survive?
- Will they get good service?
- Will they be able to work with you?
- Can you deliver what you promised?
- Will it be on time and on budget?
And on top of all that it takes forever to do a big deal with large national companies or organisations. You’ll need to make sure that you have the cash to sustain you through long protracted negotiations.
The founders of this company have done a lot of work developing their financials, putting in place staffing structures, technology requirements and doing quite a bit of market research. But they need to step back and assess a broad direction before getting into the level of detail about staff, technology, etc.
The first issues to consider are:
- What are my chances of getting funding?
- What are my strengths and weaknesses (as a business)?
- What are my best options for moving forward?
This involves thinking through how to counter their weaknesses and to build up their “deal” so that they get some form of investor interest.
And that “investor” may well be a competitor. If you have a product/service that you think is superior and a competitor is well established with all the contacts and track record needed to get into some really serious markets, then this is an option that should be on the table.
Now you’ll need to tread carefully when dealing with competitors. You don’t want to give everything away or have it taken away. But there are more opportunities for early stage companies from competitors than most people think.
The next option to consider is forming a joint venture or alliance with a well established company that is operating in the markets that you want to get into. They may even be able to provide some funding and/or offer infrastructure support that may save you heaps of cash.
If you are in this situation here are a few tips that may help:
- Prepare a list of your strengths and weaknesses from a business perspective including marketing, financial management, product development, staff, etc.
- Describe your ideal partner. What would you look for in the ideal partner?
- Prepare a list of what you would bring to any joint venture or partnership deal.
- Start networking at investor events. There are a number of angel and venture capital networks. Get on their lists and start meeting them. You just never know.
- Prepare your elevator pitch so that you sound intelligent. Whatever you do just don’t “wing it”.
- Have a plan in place just in case you get an investor or potential partner interested.
- BE FLEXIBLE. Look for different ways to generate revenue. You may just need to make some compromises here. Demonstrate that you are prepared to do whatever it takes to get your business going.
And above all, be persistent and thick skinned. You’ll be faced with a multitude of challenges and it will get frustrating. But that is the land of entrepreneurs.
Till next week…
Gail Geronimos, is the founder of Achaeus, which helps entrepreneurs develop their businesses and she has just started a new site www.pitchingtoinvestors.com with tools and tips about how to develop killer presentations to raise capital.
To read more Gail Geronimos blogs, click here.
Karina Hilterman writes: Thank you for your wise words, great guidance for those seeking investment capital. Your article is spot on for me and my business. I appear to be in a “Catch 22” situation regarding raising funds, and I am finding out this is a common situation– to have great ideas, lots of enthusiasm, positive and under capitalised!