If you’re running a startup, chances are you’ll need to know how to raise capital. You need to know how to find the right potential funding sources and once those sources are identified, how to increase your odds to get funding from those sources.
Develop a networking strategy. Finding grants and awards that match up to your startup can be greatly enhanced through networking. I know—everyone talks about networking. But don’t confuse networking with social media. Social media is, to some extent, based on the idea that we all like to be connected. But social networking is not what I mean by networking. I’m talking about creating a networking strategy, an organized process with objectives and targeted outcomes.
A networking strategy can also be useful in finding venture capital and angel investors. First you need to identify a few organizations in your area that support start up companies. Northeast Ohio has a very robust entrepreneur network. Your job is to pick out a couple organizations within the network to meet with. Set objectives for your meeting – remember it is likely your first meeting will be for 30 minuets, so your meeting objectives should be targeted but limited.
The first part of the meeting will likely be focused on you describing your idea, the current status of your company and what you want to get done in the next six months. Be specific, don’t ramble, get to the point, let them know that you want to link into the network and you want to identify sources of potential funding. And come prepared with questions. Here are a few you should ask:
- Do you offer assistance to companies like mine?
- Does my idea / startup fit with their organizational strengths
- Who else in the network should I meet with?
- Can you give me some suggestions on what I should do next?
Repeat this process several times with different organizations. After you have met with five or more organizations you will have a good understanding on the local entrepreneur network and where you and your startup fit in. Then, schedule a second meeting with two or three of the organizations you feel you have the best fit with. Think of them as an informal advisory team.
Demonstrate credibility. You should have clear objectives set for your startup already. When you’re trying to raise money, they’re even more important. Identify the actions you need to take to process your startup and (this is real important) complete them. Then when you ask for money, you can point out that you have hit your targets. This builds creditability and creditability is a key to getting funding. You need to be able to identify what you will do with the funds and why the additional funds will bring you closer to the completion of you next set of objectives.
Don’t be afraid to point out where you have had setbacks or failures – it is part of the process and if you can show how you learned from those setbacks and why you are better positioned for success now because of them, your will be building creditability. Creditability is a key to getting money—it may even be the key!
Know your audience. If you’re asking your family and friends to invest in your company, give them a proposal outlining the business opportunity, why you think you will be successful, your short-term objectives, why you need their help in funding the opportunity, and what they will get from you. It may be a simple “thanks mom” or it may be getting in on the “ground floor” with a small piece of equity. Both can work, but you need to be the one deciding what the return is.
When you go after grants and awards, how you proceed is determined by the organization you’re approaching. Each organization has it own process – take some time to understand what the process is and modify your approach to support their process. Most organizations will want you to provide background information and make a presentation. Not all presentations are created equal! Take the time to work with your advisors and if possible an entrepreneur-in-residence who’s linked into the network. Review and practice your presentation, listen to feedback and learn how to take advice. Then redo your presentation a few times to incorporate the important suggestions (let the others go). It’s your idea and your responsibility to communicate your company to the audience. At the end of the day the buck stops with you.
Don’t give up. Finding money is hard work. Repeat the process, keep up the networking, seek and find advisors, set objectives and complete them. Do it again and again. It’s a lot of hard work. And it’ll take more time than you think it will. If you think it will take six months to a year, allow double or triple that amount of time. You will have some failures on the way. Use them to learn by. Adjust your business plan and fundraising strategy to fit the new reality you find during your journey. But most of all don’t give up!
Preparation sets the stage for good luck, take time to be prepared.
John Rastetter provides oversight for Innovation Fund Northeast Ohio’s award agreements and quarterly reporting for the fund. He advises applicants on their business strategy and the overall application process. He works with the recipients to finalize their award agreements and project milestones. He has 39 years of experience in various financial positions focused on manufacturing operations, budgeting, forecasting and strategic planning.