For most businesses, startup funding is necessary to get them off the ground and to sustain them for an initial period. Some startups seek funding from friends and family, which can be an excellent approach. Others, perhaps because of a need for larger funding, seek professional investors.
The single most important basic is having a fantastic business plan (not the written document but the real plan for how you are going to dominate your market and grow your business). If you don’t have a great real plan for your business, if it doesn’t hit the right markets, doesn’t address issues such as differentiation and doesn’t have a killer financial model, it doesn’t really matter how well written your plan is or how many cool graphics you throw in. But, assuming you do have a great idea, you will need to draw it out in as much detail as you possibly can at this stage in your business. All early stage investors know that you are making your best (educated) guess about how things will go, but what they want to see are that, first, you really do have a great business idea and, second, that you understand exactly what it will take to become successful. Among the most important factors of success are the experience and knowledge of the core business team. Make sure that you can convince anyone that you have the right stuff to make this specific business go. If it’s technical, you better have the background. If it’s retail, you better have some experienced people who know retail in your niche.
If you don’t get professional help writing your business plan and nailing down the financial projections, you will be operating at a huge disadvantage. Although there are myriad relatively cheap sources out there for getting help with a business plan, unless someone spends the time to really understand your business ideas and help you flesh out the market competitive information and your positioning, and has the real skills needed to put together a comprehensive and convincing document, you will be creating a boilerplate, boring, run-of-the-mill plan, like so many others. I can’t tell you how many second-rate plans I’ve seen and most angel investor have an incredibly good eye for spotting low rent plans. If that’s how you’re starting, they think, it’s indicative of your business mindset. Not good.
So, let’s assume you have a killer idea and you’ve done the intense and difficult work of writing it all out, doing your market research, nailing down costs and cash flow over your first 12 months…now you better have a really clear idea of just how much of the business you’re willing to give up for the level of funding you need, or, what kind of terms you can afford to accept for a cash return. Depending on the level of funding and risk, you are going to have to give up a substantial portion of the company. But, you can think of it this way. The probability of success if you need $1M in start-up funding and don’t get it is about 0 out of 100. If you get your funding, you can at least step into the ring. You’ve earned the right to compete in a very tough game. Maybe your odds go up to 10 to 30 out of 100. Even if you have to give up nearly 1/2 of the company (I would NEVER give up more than 49%), you’re going to have a shot at success, as opposed to a portion of nothing.
Remember that early stage investors are always seeking high potential returns on their investments, so they look for the lowest risk they can find with significant upside potential. Many investors will be focused only in specific areas of business, where they believe they understand the market and so can make more judicious decisions. There are many sources available for finding angel investors. There are almost always angel investor organizations that you can contact to find out which of their members might be the best to approach.
Finally, aside from having a killer business, the right people (experienced), and a great plan, there is nothing that can help you more than getting a personal introduction to a potential investor. While it’s no guarantee of getting the funding, at least you’ll get someone’s attention.
If you can’t get someone excited about what you are planning to do in about 60 seconds, you aren’t going to get funding. This goes beyond the ‘elevator’ speech. It’s not enough to just present a coherent, clear picture of your business, you have to generate the excitement along with it. Great businesses have passionate people behind them. If you are excited and communicating that excitement, you aren’t going to convince anyone that you can be a success.
ROI Capital Consulting can help you with every aspect of getting funding, from early discussions of your business ideas, to working with you to develop a killer plan, rehearsals of presentations, and finding the right angel investors to get your ideas in front of.