CEO of eCapitala fast-growing fintech company transforming finance for small to medium-sized businesses.
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Raising capital is important to the success of any business. But it can be a time-consuming process and especially challenging for small and medium-sized businesses (SMBs) that don’t have the same resources, networks, or visibility as larger companies. Here are five tips that, from my experience, can help make your capital raising efforts more successful:
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1. Start with a plan.
A critical document for any business, it’s important that your business plan is clear and concise when revised in a pitch deck so that it clearly communicates your vision to potential investors. You want it to be easy to understand; they should be able to understand your company’s value proposition and quickly grasp the differentiators and key points of your pitch. Some elements that a typical plan should outline are the details of your business, your mission, goals, target market and financial projections.
2. Tailor your pitch to your audience.
Going into a pitch, you need to know your audience’s priorities and preferences as they can differ based on the investor. In other words, it’s important to tailor your pitch to your audience and know your audience.
For example, if you pitch a venture capital firm, they may be more interested in high-risk, high-reward opportunities; however, if it’s a family office, they may lean toward conservative deals. Understanding their preference for going in will help you develop a pitch that addresses their interests and concerns.
Research their focus and track record in advance so you understand what types of companies they typically invest in and how much risk they are willing to take.
3. Build your network.
Like a team sport, no one raises capital alone, so make sure you’re surrounded by the right people – from advisors, lawyers and accountants to individual and institutional investors.
These people can not only help you navigate the essential legal and financial aspects of the process, but can also provide you with valuable insights and connections. It’s especially important to have peers in your industry who have raised capital from the companies you’re targeting so you can learn about their investment style and expectations ahead of time. Building a strong network takes time and effort, but it can pay off in the long run.
4. Be willing to negotiate and compromise.
Raising capital is a process and you will probably have to compromise on some level. For example, you may need to give up some equity in your business, agree to certain terms, or compromise on interest rates or financial covenants. Every deal is different and depends on your specific needs and goals.
To prepare, be ready to justify your appraisal or your ability to repay principal or interest on a loan. It is important to have a clear understanding of your financial needs and the amount of equity you are willing to part with in exchange for financing.
You also need to identify all the non-negotiable elements of a deal that are essential to maintaining a successful strategy and find ways to get around them. By doing this, you can ensure that you make informed and strategic decisions when seeking financing for your business.
5. Find alternative options.
Traditional methods of raising capital are not for everyone, especially in this economy. If they don’t work for you, explore alternative options; crowdfunding platforms, peer-to-peer lending or alternative finance companies, for example, are all possible options.
These may offer everything you’re looking for and are more easily accessible for your business. It is important to do your due diligence and choose the one that best suits your needs.
As you begin your journey, remember that raising capital isn’t always easy, but with the right plan, network and mindset, it’s possible to secure the funding you need to grow and succeed.
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Janice has been with businesskinda for 5 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider businesskinda team, Janice seeks to understand an audience before creating memorable, persuasive copy.