If you’re looking to raise capital, it’s important that you have a solid plan in place. But many entrepreneurs find that raising money has become more difficult than ever—and for good reason.
With the growth of online funding platforms and high-profile IPOs (initial public offerings), investors are increasingly looking for companies that can demonstrate promise and profitability beyond their seed stage.
Perform a self-assessment
- Understand your business.
- Understand the market.
- Understand your competitors and their strengths, weaknesses, and customers’ needs.
- Understand the financial situation of your company and what value it has to offer investors in exchange for investment capital: can you afford to pay back loans? If not, how will you fund future operations? Is there a cash flow problem that needs solving before you can raise more money from investors or just keep running as is (in which case this step may also help with positioning yourself).
You need to be specific about what you want to do and how you will do it. If your business is a restaurant, for example, then specify what kind of food and beverage service (or dining experience) you offer. Is it fast-casual? Casual fine dining? Or perhaps even a hybrid that combines elements from both categories?
You also need to be as specific about the market(s) in which your company operates as possible. This can help investors see opportunity in their investment by showing that there’s an existing demand for products/services similar to those offered by yours — or even better yet, an underserved niche where demand seems high but supply is low due to lack of competition (i.e., no other businesses offer similar services).
Finally, make sure that when describing problems that your business solves or gaps in its field exist—and how these things relate back into potential customer needs—you’re able to explain why there hasn’t been any research done thus far on solving this problem before now!
The first step in positioning your business to attract investors is being realistic about the size, scope and value of your company. This doesn’t mean you should be complacent about where you are today—it’s important to understand that no matter how far along you are as an entrepreneur, there will always be new opportunities available for growth.
But if you don’t have any experience raising money or have done little groundwork before launching into this process, it can be difficult to get a sense of what kind of support would be required from investors and how much money they might expect from your company each year.
In order for potential investors to determine whether or not their interests align with those of yours when considering investing in your venture (and vice versa), both parties must clearly communicate their expectations beforehand so that misunderstandings don’t arise later on down the road after some hard negotiations have taken place between them both during due diligence stages.
Be prepared to offer a stake in your company
Shareholders are the owners of your company. They have a say in how it is run, and can vote to remove the board of directors or vote on major decisions. If investors want to sell their shares, they will usually have to go through you first—if you don’t offer a stake in your company, then investors may not feel comfortable investing there at all!
If you have difficulty raising capital you may have to offer shares of your business as part of the deal
If you have difficulty raising capital, you may have to offer shares of your business as part of the deal. If so, it’s important that investors understand that they are buying into something more than just an idea or a concept. They are investing in a company and its assets—and if things don’t go well for the business, they will lose their investment with little recourse.
I hope you’ve found this article useful and that it has helped you gain some insight into how to position your business for investors. If you have any questions about how to go about setting up a business, feel free to get in touch.