It is hard to raise capital for new businesses. All of the collective wisdom may lead you to a conclusion analogous to that of Dante’s Inferno – Abandon All Hope Ye Who Enter. While it is challenging to do, there are ways to minimize the pain points and maximize your probability of success. Attract Capital has worked with many new companies and established companies. We have interacted with over 1,000 business owners over the past 5 years alone. Our advice for a new business owner is the following:
1. Do your homework and know your options.
2. Invest the time in writing a high quality business plan.
3. Be realistic about your assumptions.
4. Build a high quality team of financial and legal advisors.
All capital seekers need to understand the capital raising ecosystem. There are friends and family members, angel investors, venture capitalists, private equity investors, banks and lenders. Each of these groups has vastly different business criteria and return requirements. You can save much time by making sure you are targeting the right class of capital providers. A business plan is like a resume for your company. The process of business planning and actually committing ideas to the written word does two things. It forces the writer to think logically and express their ideas in an objective way. It also forces the writer to set goals which they must then achieve.
Well constructed business plans will help differentiate you. If your business plan is well written and tells a good story, your capital source is likely to see you in a more favorable and investable light. Realistic assumption setting is an important part of the business planning process. Avoid the temptation to project a hockey stick trend. Also, assumptions that are too detailed or obtuse run the risk of not being understood. It is best to keep assumptions both simple and conservative. Finally, investors sometimes measure your professionalism by the company that you keep. Find a financial consultant with experience in capital formation and business planning to assist. Find a good accountant who can set up an accounting system that is easy to use. The sooner you build your team of advisors, the sooner you will move forward, out of the inferno and into the upper air. That is the labor that is the task!