I have raised nearly every kind of capital for my company— Friends and Family, Crowd-funding, Angel, and Venture Capital. Having the cash to invest in marketing and professional staff was critical to getting our revenues into the seven figures and fast-tracking our growth at Little Pim.
You might have heard that women don’t get access to capital the same way men do. Studies show that women start their businesses with six times less capital than their male counterparts. We make 27% of the revenues they do and are twice as likely to shut down because we run out of cash. But a recent NWBC study confirmed that more women are going after capital and are getting it. And more women are investing in women-run companies. The same study shared more good news for women entrepreneurs: A full 26% of all angel investors are women (up from 18% in 2013). How can you be one of the funded?
Top 5 Ways to Raise Money for your Business
- Self-funding and Crowd-funding
- “Bootstrapping” and re-investing profits
- Bank Loans and Grants
- Angel Investors
- Institutional Investors (Venture Capital, Private Equity)
Where should you start? If your company qualifies for grants or loans start there, because then you don’t have up give up equity (meaning, ownership) in exchange for the dollars. Many entrepreneurs are also turning to crowd-funding, using sites like Kickstarter and Indiegogo. You can look into women-specific fundraising platforms like Plum Alley and Circle Up. They all have tutorials about how to run a successful campaign. My focus is on teaching women about raising Angel and VC because these are the biggest dollars and the hardest to raise. You can find ample information on the Internet about crowd funding, and bank loans and grants are pretty straight forward. Raising Angel and VC, however, requires a complex combination of skills, strategy, and staying power.
Top 10 Tips for Raising Angel and VC:
- First, get very clear on what the money you are raising will help you achieve What kind of increase in revenues? By when? How will funds be used? How will the investors make their money back? When you sell or do you plan to pay dividends?
- Make sure your team at work has your back. Even if you have a small team, they need to know you’ll be out raising money and out of the office 25-50% of the time. Make sure they can run the business for stretches of time without you.
- Network like crazy and tell everyone you know you are looking to raise money and how much. Talk to other CEOs who have raised money. Ask for introductions. A warm introduction is 1,000% better. Check LinkedIn and Angellist.com to see who in your circle knows investors. Call local colleges that have alumni investor groups and tap your own alumni network.
- Get your internal systems in order as you’ll need to quickly access information to send to potential investors. Think about how you are going to keep track of the potential funders you meet and start an investor tracking spreadsheet.
- Say yes to “No”. You will hear a lot of NOs, and that is ok. It’s part of the process. Say yes to everyone who will speak to you even if they don’t seem like a good fit. Investors know other investors. Always ask if they can introduce you to someone else.
- Line up support from friends and family. You may have to take meetings late at night or early in the AM. You may have to get on a plane at the last minute or curtail a family vacation.
- Join a professional organization to expand your network. Set aside one night a week for attending organized events where you can meet other CEOs.
- Make sure to “close the loop” and thank people who refer you to others, tell them how the meetings went. You want to build good will along the way. Someone who is just helping out today may become your investor tomorrow or be asked for a character reference from a potential investor.
- Keep potential investors informed. It can take several weeks or months for an investor to write a check so you have to get creative about keeping them interested – and not creating too much busy work for yourself in doing it! You can send out a monthly or every other month email to everyone you have been meeting with. Tell them about milestones you have achieved, funds you have raised and other information that might keep them interested in your company and you.
- Don’t forget to ASK. For most people actually asking for the check is the hardest part. Make sure to ask in person and practice, practice, practice asking with a coach, advisor or fellow CEO. You also have to be ready to hear no. Remember, some no’s actually mean “I don’t know enough yet” or “No, not now.” A no can turn into a yes in time. Whether you get a yes or a not now, don’t forget to ask for other introductions before you leave the meeting.
Remember, raising money makes you braver. It builds that important mindset of having the fear and doing it anyway. You’d be surprised what amazing things can happen when you take a risk and force yourself to go outside of your comfort zone. Suddenly, you find people to help you and money in places you might never have thought possible. Raising money is how I came to my personal motto “Fortes Fortuna Juvat” (Fortune Favors the Brave). Now it’s your turn to get brave and let luck favor you!
Until next time,