While in a meeting with a business counterpart he said something that I found intriguing:
Most people know how to beg for money but few people know how to ask.
You might be thinking whats the difference. I have seen lots of pitches and had many new entrepreneurs come to me for capital requests. There are definitely two camps the Beggars and the Askers.
One hallmark of these requests is that they are trying to figure out what amount I will be willing to give rather than what capital is required. The problem with this approach is that in the end you always end up short changing yourself, even if you get what you begged for. While we should always remain humble there is no need to travel hat in hand to a potential investor.
Askers all have one thing in common. They are not coming to request money but they are presenting opportunities. When you are going before investors your focus should be on conveying the opportunity not on the dollar amount. Remember investors are out of a career if they do not invest in opportunities, so help them stay employed.
Confidence is the difference between the two types... Don't leave home without it!
One of the biggest mistakes that new entrepreneurs make is going at it alone. Just because it was originally your idea does not mean you have to execute it alone. In short, everyone should have a co-founder. This is not to say that a single founder cannot be successful (think Mark Zuckerberg) but there are many more team efforts that showcase how the co-founder dynamic made the company a success. Famous examples of co-founder teams:
While you may not recognize all of the co-founder names they were all integral to the brands (personalities) we recognize today. Conventional advice is that a two founder dynamic works the best. However, teams of three and four can also be successful as long as you recognize with the addition of each personality the politics can become difficult. When choosing a co-founder here are some factors to consider.
Share your story with me... Tell me about you and your co-founder.
...VC firms aren’t doing you a favor by meeting. Their whole purpose is to deploy capital -- in fact, they’re losing money if they don’t. -Ryan Holmes, CEO Hootsuite
Once you have leveraged those funding resources nearest to you and you need more cash then its time to gather all your data, sharpen you pitch, and head to angel investors, venture capitalists, and private equity funds.
This is a big step for any company and you should not pursue this funding level on a whim. Here is one of my favorite articles for finding the right firm and what to expect.
Crowdfunding has now become common place for anything from medical bills to funeral and legal costs. While you may not be able to recite the definition above you likely have heard Indiegogo, Kickstarter, and Gofundme.
If you are considering a crowdfunding site for your business here are a few considerations:
ARE YOU SEEKING CROWD-FUNDING OR CROWD-INVESTING?
Not sure? Well here is the basic difference. Crowd-funding does not offer equity to those who give. You may be offering some memento as appreciation but there is not expectation of shares in the company. Crowd-investing on the other hand is equity based. In this instance those who invest receive shares in the company. Those who invest will be seeking to liquidate their shares, often to a larger investor for a return on their money. Knowing which giving model you are interested in will dictate which platform you choose to run your campaign on.
READ THE FINE PRINT!
After you have narrowed down your platform choices then read ALL the legal language. If you have chosen the investment route, then be sure to know what your obligations are to those who give. What is the expected return? Are there other terms? How soon can you get the money? What percentage of the money does the platform take? If you are unsure of the terms or what they mean consult an attorney.
DON’T UNDERESTIMATE THE DIFFICULTY!
Just because you can press a few buttons and share it with everyone in your social network don’t forget that this is still a pitch. You need a compelling story, a product that people ACTUALLY want, a marketing campaign, and finally you will have to be annoyingly persistent. If you feel as though you aren’t ready to pitch to a small group, you may not be ready to pitch on-line. So, prepare, and plan just like you would for any other set of investors.
THIS IS NOT THE FUNDING METHOD TO SAVE THE COMPANY!
You may have read where a company, as a last resort, turned online and things were great but waiting until you are in financial trouble is not sound advice. Because this method of funding takes a patience you should be sure that you are not trying to cover the basics (like salaries or sales orders) with this funding method.
My thoughts are that crowd-funding or investing work best when you have a prototype to show or a tangible product. Services may not do well with a crowd campaign. In case you are interested in crowd based platforms dedicated to business check out the link below.
In the last post, I talked about the first steps for funding but what if you need more…where do you go next?
Loans- Loans are usually the first place that every new business person thinks of. Running down to your local bank should be simple, I mean you have banked there for years so they should be happy to give you a loan—Right? I often remind people that banks are a business and are risk averse. That means you need more than your bank account and a dream. Things to consider when seeking a loan:
Small Business Administration (SBA)- The SBA is a great resource whether you are seeking a loan or not. Should you decide to pursue a loan with the SBA then, please, please, please, work with a loan administrator. They know the ins and outs of the process and are the most knowledgeable on getting a yes.
Finally, remember taking a loan means you are taking on debt. YOU MUST PAY IT BACK (with interest)! Borrow wisely.
Whether you are a new business owner or a seasoned veteran, funding your venture should always be top of mind. In business finance lesson 1 is always Cash is King!
These should be your first stops on funding path.
Every business owner should have some skin in the game. If you are just starting out but have not invested in yourself other investors may feel you are not fully invested in the business.
Word of Caution:
In general, I do not advocate for people to completely drain their savings and rainy day funds. Life happens and the last thing you want is a car repair or a hospital visit to put you on the curb. I also don’t advise people to completely drain their 401k. This can seem like an attractive option but the tax penalties generally are not worth it for most business owners. We should all be saving for retirement whether we own our business or not.
Word of Caution:
Be careful handing out large pieces of equity to family and friends. This will limit your choices in the next phases and could mean having too many opinions when decisions need to be made.
Word of Caution:
Some government funding sources have very specific guidelines so be sure that you have read what is expecting of you.
The vision must be followed by the venture. It is not enough to stare up the steps - we must step up the stairs. -Vance Havner
Vision boards are the visual representation of where you would like to see your life. Often, we become excited about filling the board with smiling faces, exotic locations, and other symbols of success and wealth but forget that postive affirmations is only a part of the process.
Dr. Shante Williams is a serial entrepreneur who started slow and in the shallow end of the business pool. She has worked in Biotech, Big Pharma, Green Energy, and Academia