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Capital Raising – what to expect when first looking to raise capital
Other than going to the bank or approaching family members – how can you raise money for a business? Raising capital refers to an investor who gives funds to assist with starting, growing or managing day-to-day operations.
Sometimes you will have a great idea for a business, but not enough money in the bank to execute it (or execute it well). As cliché as it might sound – that is where we can help. Gilligan Sheppard help fund, or help find the right people to fund, an idea that we think has the potential to succeed. Each year we see dozens of start-ups looking to raise capital through debt or equity funding.
Our aim is to sit down with these entrepreneurs to get an understanding of their business plan and assess whether, in our professional opinion, these ideas have a viable spot in the marketplace, and whether we, or our investors, are the right people to help.
Some ideas we come across are fantastic, and others not so much. In order for us to do our job effectively, there has to be confidence on both sides that this business will lift off.
Should we decide not to raise capital for a particular start-up, you can be sure that we will always provide plenty of feedback and explain why we don’t think we are the right fit to help you, while also leaving you with advice and other points to consider. Other times we might connect you with someone who we think would provide beneficial knowledge or expertise in your industry – which might just be the key to help you grow.
How to improve your chances to raise capital
Be confident in your pitch and have your ‘pitch deck’ (presentation) ready.
The utmost important thing when looking to raise capital for your start-up is to articulate yourself well! Be confident in explaining your business in its simplest form, but also be prepared to know your numbers and details off the top of your head.
Once you get yourself (or your ‘pitch deck’) in front of an investor, you want them to really grasp your business idea and what you are trying to achieve. Try giving your pitch to a friend or family member – if they do not understand your industry, even better – this will give you an idea of what parts might need to be broken down further or rearranged. If an investor does not understand your concept, they simply won’t invest. Your pitch deck should start with your idea written in the simplest way possible.
Can you sum up what you are trying to achieve in one sentence?
Too many businesses lose the opportunity of gaining a good investor by not being prepared. Once we look over a pitch deck that might have potential, we sit down for a chat to try and pull as much information as possible to provide other perspectives and ideas that could help benefit the business. This way, we can also be confident about approaching certain investors on your behalf (if it is not ourselves).
It is worth having a professional prepare your financial information. The information will then present more creditably to an investor, and a professional can ensure numbers are accurate, easy to understand and therefore leave less room for error – any perceived weakness in the credibility of the numbers will scare investors.
What do we look at when raising capital?
When we are deciding whether to fund (or help fund) a start-up, there are some things we always look at, as would any investor. The key takeaway here, is to make sure you have this information ready and presentable as early as you can.
In order for us to make an assessment on the likelihood of your idea succeeding, we’ll always look into:
This is what you do – your idea.
While we read all the pitch decks we receive, we do not always have a lot of time to decipher your message. If we cannot figure it out your idea quickly, we are likely to move on to something else.
Likewise, if you are meeting with us in person, time is not your friend and you really want to use it wisely. The quicker we can get to the bottom of your idea, the more fruitful and explorative our meeting can be. This should not frighten you but encourage you to come prepared.
Helpful tips: Be ‘matter-of-fact’. Do not use too many words – get to the point. Articulate really clearly what you’re doing, so that it could even make sense to a five-year-old. The more impactful and less fluff, the better. Basically, refine your elevator pitch.
The ‘pain point’.
It is no good having a solution to a problem that really isn’t a problem. Are you a vitamin or a painkiller? Will people really go away to use your software/widget/sports drink/windmill? Will you change someone’s life? Again, articulate really clearly why the problem is a problem, because we may not experience the pain point ourselves. Help us understand. Help us understand why you are passionate and confident about providing the solution.
Why you? Why now?
Do you have a patent? An algorithm? A new-and-improved formula? Special industry knowhow? Amazing insight? Be clear about why you have an advantage over the competition. And yes, there’s always competition. Know your direct and indirect competition – include this in your pitch deck along with why your idea will have the advantage.
If you have the best solution to an extremely frustrating problem, but only one person has that problem, you are not going to make a billion dollars. But likewise, do not talk about a total addressable market of eight billion people. Be realistic on the total market size that you are likely to address. Give it some real thought, along with wider economic factors that might have a play.
I have listed this last, but it’s probably one of the first things we look at, if the idea piques our interest. Sometimes, even if the idea is so terrible that it seems like a joke, it can excel with the right team (with a healthy dose of feedback and a strategic pivot).
Show us clearly why you can and will execute on your idea and why you are worth backing.
- Have your information and pitch ready
- Simplify your idea to gain quick attention
- Consider having a professional help prepare your numbers for credibility
- Know your weaknesses
We are always happy to meet ambitious founders looking to change the world. If you want to pitch to us, or if you are a bit earlier in the process and want help refining your idea, your team and your pitch, get in touch. We will have a chat, and if we’re a good fit, we’re happy to meet to hear more about your start-up on a completely complimentary basis.