One of the biggest challenges entrepreneurs ever face is how to raise money to launch their business. Here are a few tips that will hopefully be able to help you through this difficult process:
Determine the need for the money.
- Is it for equipment? An office space? Marketing? Product development? You need to be able to provide investors with a return on their money, so before you ask for it, figure out exactly how you’ll be using it and what the odds of your success will be.
Investors invest with the goal of a high return.
- Investors don’t want to break even, they want to make a profit. You need to raise the valuation of your company from what they invested in to what it sells at.
Be cautious about how much valuation you project.
- You’ve put a lot of your time and energy into the company, so you might be willing to accept a lower offer than your investors. If you don’t both have the same return objectives, this can create conflict down the line if you want to sell your company before your investors do.
Calculate the amount of capital needed to continue growing.
- Don’t tell investors you need their money so you can pay yourself and make a living while you build the company. The money should be used to build the company, grow it, and provide a return on their investment.
Be cautious with how you spend the money and how much you take.
- If you ask for too little money, you risk running out and making bad decisions to try and avoid this. If you ask for too much money, you risk not spending it wisely and/or making lazier decisions which will cause the investors to doubt your abilities.
If you keep your eye on the ball – providing your investors with the return on their money they have established to you in advance – then you and your company will ultimately benefit along the way.