There are a lot of things to consider when a start-up decides that they want to expand their operations one of the biggest being finding the capital to support this decision. Many people focus on the positive outcomes that can come with raising their capital like having a larger customer base, more revenues and public exposure. While it’s always good to think on the bright side sometimes things don’t go as planned especially when you’re a new entrepreneur trying to raise capital. When it comes to venture capitals there are couple things they do that can ruin their chances of gaining the capital they need. Below are some examples of those mistakes these new entrepreneurs make while trying to raise funds.
Too Much Detail: Just like salesmen your aim as a entrepreneur trying to get other people interested in investing in your business is to sell yourself. This is why pitches are used as they are very concise descriptions of who you are, what you’re offering and what’s your business/resume is about. With this in mind it is important to keep your pitch small and straight to the point because nobody has the time to hear an essay which is where some entrepreneurs fall flat in. There are those who feel that their start-up/product cannot be put in a few words and therefore needs to have paragraphs to better explain all the features and details that would be lost in a pitch. When it comes to investment however the thing that investors are focus on is the problem that people have, how is your product fixing that problem and why customers are buying it.
Investors Can Be Partners Too: Some start-up founders have also neglected to realize that investors that have offered to fund their start-up are also key business partners. “Sometimes entrepreneurs don’t fully think through the fact that successfully raising capital comes with both the advantage and the cost in equity of adding another partner to your team,” said Prahasith Veluvolu, CEO at Mimir. “For some startups, having another advisor or partner on hand is a huge benefit. For others, it might not make sense.” Consider what are the costs and benefits when accepting capital from a investors and assess what are the terms that come with that deal. Picking the right person to invest in your start-up is just as important as seeking investment since every investor have their own interest and finding the right person saves you time of trying to pitch to every investor you come across. Be mindful of who you choose and think strategically about the pros and cons if you want to work together.
Having No Future Plans: Like everything in life being unprepared is a recipe for failure in anything that you’re planning to do. If you’re an entrepreneur seeking to get capital from a investor the last thing you want to do is show up with no business plan. Investors like to see where their money is going to so be ready to take the time and formulate a business plan that shows what are your goals/plans after receiving investment and what opportunity awaits investors should they decide to fund you. Having a business plan before and after acquiring funding indicates your are a committed person who has long-term goals for their start-up and has a plan to meet those goals. “We always want to see that the entrepreneur has laid out a road map. We all need to be very clear on where they’re going and how they’re going to get there.“ says Herb Sih, the Managing Partner at Think Big Partners based in Kansas City.
If you’re just starting out as a entrepreneur and you want to find capital to support your start-up you can avoid some of these rookie mistakes by keeping your pitch short, look for the right person to invest in your start-up and have a business plan for the future. There are other alternatives when it comes to raising capital but keeping these tips in mind is always helpful if you’re planning on going to an fundraising or networking event. Now that you know some of the ways you can be prepared you can now get ready to put these tips into action on your next fundraising event so that your start-up could eventually become an enterprise.