Best Practices for Raising Capital for StartupsMay 29, 2018
As business consulting experts, Qorval has worked with various companies in different industries, sizes, and stages for more than two decades. Through the life cycle of a business, there are different challenges – and Qorval can bring value and uniquely targeted expertise to a variety of challenges each stage brings. A particular stage that can require the guidance of a business consulting firm is a start-up. A primary challenge that start-ups face is raising capital. There are various ways to go about raising capital for your start-up, but it can be overwhelming to know where to start. Entrepreneurs should consider these best practices for raising capital that will lead your startup to growth and profit.
Develop your Elevator Pitch
Before you start taking any steps to look for investors, you won’t be successful without a solid plan in place. A great way to start developing your game plan is to start with a simple 1-3 minute speech that explains what you’re trying to accomplish. Figure out how you will establish the problem that you’re trying to solve with a clear and concise answer, highlight the unique features of your product and services, and identify future milestones. The goal is developing your short “elevator pitch” that you can use to get started in establishing your startup and looking for ways to raise capital.
Business Planning and Analysis
You might know everything there is to know about the product or service you’re selling, but it’s important to evaluate the rest of the market and how it will apply to you. Take the time to research competition, industry, and market. Understand how direct and indirect competitors might affect your business, the conditions of your industry in the current moment and in the future – and determine the potential appeal of strengths and weakness of numerous markets. Not only will this help you with your success in business but will give you the expertise to answer any questions investors have for you.
The next step is to create accurately projected financial statements for your business plan. This will give investors insight in how your business will perform financially according to current market assumptions– giving them an idea if your business is worth their investment or not. This step includes creating a revenue model, sales projection, organizational chart with direct, indirect and SG&A expenses, balance sheet, income statement, and cash flow statement. This stage can also help you determine exactly how much capital you are looking to raise from potential investors.
Find Your Investors
Much like everything else in business, there is no one size fits all approach to finding investors.
- Friends, Family & Founders (FFF) – According to the Global Entrepreneurship Monitor from the Babson & London School of Business, 50% of startups receive investment and funding from family and friends.
- Angel Investors are accredited investors whose net worth exceeds $750,000 at the time of investment, who typically invest in startups at early stages. Of course, not everyone has friends and family or angel investor connections, so there are other options.
- Venture Capitalists are investors typically invest significantly more, but usually at a later stage when the company has a higher valuation. They can represent outside companies, groups of “HNW’s” or high net worth investors, or other financial groups. They typically require a higher level of participation in day-to-day company decisions.
- SFO’s (single family office) are private companies that manage investments of families that have accumulated wealth or trusts over generations. Typically, they don’t have hands-on experience that venture capitalist bring and simply provide capital without guidance on company decisions.
- Crowdfunding is the practice of funding by raising many small amounts of money from a large number of people and has grown in popularity through social channels.
Contact A Professional Business Consulting Firm
Qorval’s ultimate goal is to help your company improve profitability and grow. As a startup, the decisions you make early on can make or break your success. Instead of getting overwhelmed by the competitive market, by trying to go at it alone, let the professional business consulting experts at Qorval guide you through the process.
Contact us today to get started.