Four Tips for Raising Funds For Your Business

Every company need funds for the proper functioning of its operations. With low to no funds, a company may not survive for long. This is why regular money injections are needed to sustain a business.

So how can you raise funds for your business?

After talking to several venture capitals (VCs) and with a lot of research, we have come up with these useful tips while planning fund-raising. We discovered that few actionable tips don’t really get talked about as much as we think they should.

Therefore, here are four tips that we have come up to help business owners while planning fund-raising.

Build Diversity in Your Team

 Having a diverse workforce or management team is something most businesses don’t think about while looking for investors. But if your team lacks diversity and let us be honest, the odds are it does, we recommend you to make changes before you start looking for investors.

Times have changed and we are increasingly coming across enterprises benefiting from a diverse workforce. For instance, if your management team is inclusive of all male members, do not be surprised if your investors ask you where the women are.

We believe gender is one factor of diversity that needs to be faced. Accomplishing race equality across the country would alone add £24 billion to the country’s economy. Additionally, if the employment rate of people in the age range of 50 to 60 is matched with those in the age range of 35 to 49, a further addition of £88 billion would be achieved.

It is also proven that diverse teams work better. It is believed that the team is quick at solving problems. Thus, equity at workplace makes a good business sense.

As a business owner, if you are consistently making efforts towards building a diverse team, it will certainly impress your potential investors.

Get To Know Your VCs

The process of fund-raising starts way before a company actually starts raising money. Also, both sides (your company and your investors) benefit equally from the process over time and get to know each other.

VCs mutually agree on receiving a lot of cold inbounds and many of them prioritise a warm introduction. Thus we recommend you to make a list of all the potential investors you plan to target and get to know them and their company well in advance. It is even better if you are introduced to the investors by your fellow co-founder.

Next, introduce yourself calmly and take time to explain your story. Get to know their views and also gather an outsider perspective on your business. Building a strong relationship with your potential investors at the very first stage is important. This will help you know whether your views and future goals align with theirs.

Once you are ready to run a fund-raising process, make sure that your investors are involved in each step. Not having your investors involved initially will make them wonder why they weren’t involved, which isn’t great for trust.

Plan Fund-Raising around Milestones

It is important for a business owner to identify turning points and milestones in their business. However, the kind of milestone-based strategy you would use is dependent on what stage you are in. Fund-raising on the other hand should be based on having reached milestones.

Why is this so important?

Milestones play as a small proof for your investors that something in the business is working. It explains them where their money is going and justifies putting more money into the business to accelerate further progress.

Additionally, it is even important to track this progress and also have data of the same. This will certainly highlight your progress and show promptly to your investors that you are slowly reaching your goals.

If you are not there yet and you need some more money for advancement, cash flow finance could be a good way for acquiring quick money for growth purposes. Cash flow finance is a funding option given by alternative finance firms in the UK. They not only help businesses struggling with cash flow issues but also act as a quick money injection for growing businesses.

Before seeking funding options, we recommend you to discuss it with your investors as it can lead to valuable conversation and they can even help you find an appropriate firm in this case.

Get the VC Math Right

Before looking for an investor, it is important that you are aware about your current state and that your end goals are aligned with their requirements. Only a certain fraction of your business will fit the match the VCs are looking for, while many successful companies may be outside of the scope for an investor.

There are several other factors that a business needs to take into consideration, such as:

·       The size of investment the VC will be making

·       The required return (the bigger the fund, the bigger the expected return)

·    Whether your business has innovative and groundbreaking ideas (in short, whether it is worth investing in your business or not?)