Navigating Through The Funding Process Successfully (Pt.2)

In Part I, we made the case for why there is more fund available to entrepreneurs now than any time in history before. We also highlighted the first two major considerations in the process of getting investment. In this final part we will discuss the rest of the important considerations, in the process of accessing and securing much needed funding, to start a new business or expand an existing one.

#3 What type of funding do I want?

There are a number of funding types available. Funding sources are often classified into different categories, such as, traditional and non-traditional, internal and external, and equity and debt funding sources. Each of which has its own unique characteristics, requirements, pros and cons. (For more details on all available funding sources, pros and cos, etc., check out my book ‘Pitch Your Business Like A Pro’).

For instance equity funders, such as, Angel Investors and venture capitalist organizations invest their money in return for a stake in the ownership of the business. They therefore expect to share in the rewards by way of profits and dividends. Unlike equity investors, banks and other debt lenders are more focused on the assurance of orderly repayment. Grant providers, such as, governments, local authorities, private foundations and trusts, on the other hand, often have an aim for the grant being provided, such as, the development of a sector of the economy, a geographic region or promoting the creation of businesses in an economically disadvantaged area with high unemployment. There are also other sources, such as, crowdfunding, family and friends, etc.

It is often a good idea to take advantage of a combination of two or more funding sources, when possible, to raise the finances needed to fund a business. Your choice can also impact on who gets to control the business and how decisions will be made. That is why it is very important to weigh the pros and cons of each option.

#4 How much of the industry do I know?

It is essential to have a good understanding of what you are doing and the industry as a whole. It is no good going in front of investors with no or little knowledge of the industry, customers and market other than your products and services. Investors, most of whom are keen on the return on their investment, would want to fund a business that has sufficient market size, able to compete effectively and has a good potential to make profits eventually, at some point, even if not immediately. If you lack the basic knowledge of the industry as a whole, it will be very difficult to convince any investor to back you, no matter how beautiful or exciting your idea may be.

The worst case scenario is an entrepreneur with little research to support their claim, who argues that their product or service is so unique with no competition out there. This is often based on little or no knowledge of the market. Whatever you do, always understand that serious investors do their own homework at each stage of the process, and it is to your advantage to know as much as possible of your industry before you approach them. Your knowledge of what exists in the market place and industry can help you come up with better ways of beating the competition and help you win over the investor(s).

#5 Management team and experience

At the heart of the process it is you the entrepreneur and your team, if you work with a team. Your experience, skill set or know-how and that of your management team, which is a major consideration for any investor. Your personality and likability also plays a significant factor in most investors’ consideration, especially equity investors. This is a major consideration for most investors. The higher the amount requested the higher the weight of consideration on this all important factor. Again businesses that are more technical or require special skills will hence need to prove that the ability of the entrepreneur and or the team are up to the task, to be more convincing.

#6 Where do I find investors and pitch to them to win them over?

Where to find the right investors is dependent on which investor category best suits your needs and vision of where you want to take your business. For instance, to get an Angel Investor on board you will have to do a bit of homework to ensure you find the right investor who believes in you, your business, your values and your vision. Because most Angel Investors come on board with more than financial returns in mind.

To research and access angel funding:

• Speak to industry experts, associations and your own network of business professionals, and attend networking events.
• Join or link up with an angel investor network or group to find an investor. Angel networks often act as introduction agencies, matching businesses looking for finance with potential investors. They are also often able to share valuable information with you, such as the general requirements of a specific business angel.

Finding the right investor is a great step, and your ability to deliver a pitch, that “paints the kind of picture” which leaves a lasting and positive impression on the investor is crucial to your success in the process. It is a kind of the ‘last act’ that must be well delivered to close the deal. Pitching is all about making a presentation in person, writing or via video to persuade the investor(s) to invest in your idea or business.

The above sums up the basics, of the process, of going about securing much needed funding for your business.

My final thought is that, there are funds available for business globally. The uncertainties in the global financial markets often causes a lot of investors to seek alternative ways to invest their cash. If you are serious about securing funding for your business, then take it seriously, prepare adequately before you set out on the journey. Always put yourself in the investor’s shoe in all your considerations. Always remember that your average investor is smarter than you think.

Don’t hesitate to contact me if you need help to secure funding or investor support for your business. My network of investors are ever ready to consider your proposal and invest in you and your business.

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