When It’s Time To Raise Money: What And When?
- Critical questions you should answer when raising capital
- Consistency and clarity will win the day
One of the most important challenges that all entrepreneurs face is raising enough capital to ensure a successful and sustainable launch. While there are many aspects in successfully accomplishing this goal, there are two questions that must be answered to achieve these desired result.
- When do I start the process?
- When do I stop?
The answers are fairly simple...
- You start NOW
- You NEVER stop!
While there is always a certain ebb and flow to the process, many entrepreneurs wait too long to start. They convince themselves that things are not quite perfectly aligned, and they feel as if they are not quite ready to ask for money. In reality, this is when you should start.
The important point to remember is never wait until you need the money to ask for it. The first part of the process in reaching out to potential investors is before you need the money. Your initial goal is simply to make them aware of your presence, show them the progress made to date and get on their radar. Your actions here will clearly demonstrate to them that you are in charge of your business, and that you have a specific road map as to where you are going and how you will get there.
At this stage, your goal is to impress them with what you have accomplished and pique their interest to learn more. Once you have done this, you can then stimulate their interest by sending them regular updates (usually monthly or quarterly) as to your progress. Again, this demonstrates in very real terms to them that you have a definite roadmap of mission critical milestones, you hit them, and your plan is working. This will definitely keep them in the game. As you check off milestones in the timeframe you have laid out, they will see your opportunity is real and they will want to be a part of it. Investors always have what is commonly referred to as FOMO, or the fear of missing out. No one ever wants to be in the position to have had the opportunity to be a part of a big success, only to have let it slip through their fingers. Remember this as you confidently follow your plan and keep them in the loop.
A second common mistake many entrepreneurs make is that once they have closed a round of financing, they take their foot off the petal, and they focus on other pressing aspects of the business thinking the money is in the bank and that they can relax. This habit is often the cause of many failures.
It is important, no, actually it is critical, to adopt the attitude that the process of raising capital is never ending. You have now raised your SEED funding; you now have capital to execute the next list of mission critical goals. NOW is the time to start preparing for your next raise. Continue the process of keeping your current investors completely updated as to your progress AND start to reach out to potential new investors to include in your next round.
Follow the same process as before. Get on their radar and keep them updated as you achieve and check off your mission critical milestones that are being funded by your SEED round. Once again, your actions here will demonstrate you have a plan, it is working, and this company is going places.
Commit your attention and activity to making this process a consistent and integral part of your business model, and you will eventually be in the enviable position of telling some prospective investors you‘ll be happy to keep them updated on your progress. But for now, you have filled your capital raise requirements for funding and are good to go.
When this happens, they will be chomping at the bit to be included in your next raise. Have fun and stay the course!
Here at Lead Read Today, we endeavor to take an objective (rational, scientific) approach to analyzing leaders and leadership. All opinion pieces will be reviewed for appropriateness, and the opinions shared are solely of the author and not representative of The Ohio State University or any of its affiliates.
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