In 2014, the number of new enterprises joining the United States economy skyrocketed by roughly 11% relative to the previous year. In other words, approximately 569,000 aspiring entrepreneurs had their “ah-ha” business moment in 2014.
While this dramatic increase reveals promising signs for the U.S. economy, it triggers a quintessential problem posed by the scarcity of resources that all of these entrepreneurs will face. Simply put, if there is a fixed quantity of money to be supplied by investors to help grow your business, how can you secure funding with so many new businesses creating more competition?
I hear you. As a member of a successful algorithmic trading group, Sparkstone Analytics, I’ve learned a lot about raising capital from investors, particularly in preparation for our upcoming Sparkstone Trading Challenge. My top three tips are shared below:
1) Have a clear sense of what you want to do with the money.
Getting an investment is great, but it’s important to plan ahead so that you know what to look for in the process of looking for an investor. You can always find a way to make things happen more cheaply and efficiently, so make sure you optimize your project budget so you can set concrete and attainable goals for raising capital.
2) Be realistic.
There are many different types of investments, and you need to make sure that your business is at the right point in its lifecycle for whichever type of investment you wish to pursue. For example, if you are convinced that with the right amount of money, your enterprise is going to be bigger than Facebook, then you may want to look for connections at a venture capital firm. Venture capitalists provide tremendous financial and logistical support for the businesses they invest in; however, they expect the business to be well-developed and may even request a seat on its board of directors. For investments below $1 million where the proof of concept isn’t as strong, an angel investor may be the right fit. An angel investor is a high net worth individual willing to invest in growing enterprises with large potential. That said, don’t put too much pressure on securing funding at the beginning. The process of examining what it would take for your business to secure an investment is valuable in itself because it will help you to set your goals.
3) Know your audience.
This is one of the most important things you can do in preparation for an investor pitch. Be prepared to discuss what’s in it for the investor, as well as why you see the partnership as a strong cultural fit for both parties. Do research to determine what your investor typically looks for in investment decisions, and tailor your pitch accordingly.
For more tips on how to successfully fund your business, visit the following link.