4 Tips for Successfully Raising Money for Your Business

Starting or growing a business sometimes requires a lot of cash. If the local bank won’t lend it, then raising money from venture capital firms or angel investors is another way to acquire it. However, this can be tricky. Private investors need convincing before they back you, and they are experienced and ruthless business operators who may have their own plans for your business. Here are a few tips to help make raising money from them easier and safer.  

1. Don’t lose control right away

Understandably, private investors will push to own as large a chunk of your company as they can in return for their money. But if you give up too much ownership too soon, you’ll have less to offer investors if you need to raise money again in the future. Cap table modeling is essential to keep on top of who your shareholders are and what they own.

2. Make your pitch concise

While it’s great to show that you’re passionate when presenting about your business to investors, remember that you are selling them your profits, not your product or service. Research shows that you’ve really only got 90-300 seconds to impress them, so don’t babble on about all the features of what you’re selling. Just hit the key points: How you’re different, how big the market is, how good your team is, who in your network can help you launch, etc. 

3. Research potential investors

This is very important because wanting to help your business is only one possibility out of many complex motivations they could possess. It’s crucial to know that they are backing you for the right reasons, that they have the knowledge and experience to help you, and that you know what their expectations are.

4. Ask for the right amount

Obviously, asking for too little money can lead to disaster. If you quickly run out of cash, you either need to raise more – usually on worse terms – or cease operations entirely. But asking for too much can cause trouble too. Investors are looking for a return, and they’re not going to get it if their capital is just sitting unproductively in the bank. They may start to put pressure on you or try to take control of the business.

Conclusion

Seeking financing from private investors is a big business decision, so it’s important to make sure that you do it right. Impressing the right people and getting the right amount of money without giving up too much ownership are essential to become a successful entrepreneur.