Doing Your Homework Can Help You Find the Right Funding Partners
Your business plan is rock-solid, so how do you get the capital that can serve as a the bedrock for your startup? While it can be a bit scary, seeking outside investors doesn’t have to keep you up nights. Nor does it mean you have to blindly beg any and all who have the money to back you. Rather, you can approach it smartly.
First Steps: Preparation is Essential
Preparation is key and will help you win hearts and minds (and financial backing). So the first steps are to look at your business and yourself.
The first order of business is to make sure you’re pitching a business, not an idea. Is your model scalable? Do you have a product or service that has longevity beyond the latest fad? Do you have the team and the talent to serve as a solid infrastructure? Do you know operations and can you demonstrate that knowledge?
Show a cash flow, even if it’s not much, so investors know their money will go toward growing the business (and profits) rather than maintaining the status quo or keeping the lights on.
And make sure you know what you’re asking for. Is the investment for equipment or talent? Do you want a partner? How involved do you want an investor to be? Do you want a mentor? Are you strictly seeking capital? Knowing these answers before talks begin helps you find investors that align with your needs.
Related to that is having a vision for your business. Make sure you have strategic objectives for your first, second and years beyond included in your business plan. Such vision is the blueprint for where your business is headed and how investors can help you get there.
Then do your research.
Study the avenue through which you’d like to gain investors. A great place to start, as well as to get your business in front of potential investors, is startups.co, which bills itself as the world’s largest startup platform that helps more than “1 million startup companies find customers, funding, mentors, and world-class education.”
There is no shortage of avenues for finding financial backing, so which one fits your business best?
Maybe an incubator or an accelerator is a better choice. They provide you with investors interested in watching their partners succeed. These are particularly good at helping turn ideas into viable business models, while providing some of the money to make it happen. They also might offer a space for your work, making it easier to work together.
The International Business Innovation Association is a great place to start exploring incubators and accelerators.
If you’re looking for a more traditional starting point, the Small Business Administration is an excellent option. The SBA typically offers small loans and grants without taking any stake in your business.
Private equity firms also are a more traditional route. Such firms give you access to a few thousand to millions in investment and typically focus their investments on businesses in their early states that show great potential for growth.