Success leaves clues!
While not the definitive guide to raising capital these 16 steps certainly include raising capital secrets that have been learnt the hard way.
I’ve split the 16 SME raising capital steps in two …
- How to make your capital raising a high quality one … and
- How to market your capital raising.
How to make your capital raising a high quality one! (Quality)
1) Write a good Story. You need create a good story. Every week I see application after application and the ones that jump out have a good story. That means that the fundamental business or idea is presented in a compelling story. As someone said long ago “He who has the best story wins!”
2) Locate a good Board. Gather an experienced Board of Directors. Investors want to know who is going to be responsible for the money they are investing.
3) Work hard on getting a realistic Valuation. Get advice on this. Of course your company is worth millions but if you want to attract serious investors it must be priced to get investors.
4) Security your assets for investors. Things like patents and IP need to be secure for the investors to invest.
5) Prove the concept. Ideas are great but a proven concept is worth more. OK maybe it takes longer but the payoff is bigger.
6) Get realistic numbers. Work hard with your accountant to get good realistic numbers that can be defended. Accountants will extrapolate the future on whatever you give them but you must brief them that you want them to challenge you on every figure. Even as a Start-Up you can get useful figures. Clearly state the assumptions behind the figures.
7) Choose a clear exit. Investors want to see that there is an event in the future that they will gain a substantial reward. Maybe you build your business to be sold to a strategic buyer. Perhaps it is a listing on a stock exchange. Again speak to your Accountant and gain clarity around this event.
8) Question your Scaleability. Is your business really scaleable once you get funds. Double check the premise that makes you believe your business is scaleable. Could it be done without you?
How to market your capital raising! (Execution)
9) Build an investor list. Take out a blank piece of paper and start writing down names of people that you know think you are doing a great job with your business. You’ll be surprised how many of them have had the thought, wow I wouldnt mind owning a business like that! Dont stop at families and friends. Look wider. Note down prominent towns folk, suppliers, customers, professional and anyone else one degree or two degrees out from you in your own circle of influence.
10) Find a good writer. The Story and the Offer need to be articulated in a way that makes it compelling.
11) Get an “Elevator Pitch“. An “Elevator Pitch” is a concise, carefully planned, and well-practiced description about “why people should invest” that your mother should be able to understand in the time it would take to ride up an elevator.
12) Get good collaterals. Considerable time needs to go in to getting good selling tools. We have found Offers on our website that include videos are 62% more successful at raising funds.
13) Build anticipation. Every big movie or music release does this brilliantly. Long before your offer appears in capital raising publications and your offer document is “live” you need to hold events, investor meetings, discussions with the prospective investors. You need to build good “Social Proof”. Find a Capital Raising Platform like ASSOB which has in-built anticipation tools.
14) Practice your presentation skills. Whoever is going to present the opportunity at investor meetings needs to practice until perfect.
15) Keep communicating. Throughout the Capital Raising process people will keep putting up their hands and say “I’m interested”. Make sure you keep them interested. Communicate when you get new investors, win awards, gain a new big customer etc.
16) Keep the momentum going. You probably have a business to run as well but need to keep the momentum going. This is done by regular communication with your prospective investor list.
By Paul Niederer, C.E.O of the Small Scale Offerings Board an organisation that has assisted SME’s or small to medium businesses to raise over $100 million in the last few years.