Raising Capital – Desperation is Disaster

When an entrepreneur is raising capital there are several important points to remember.  The first is to create a solid clear business plan.  I know I push this all the time, but most people have no idea how crucial this is and leave it for last.  Start building it at the beginning. It will change and that is good, it shows life and growth of your business.

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The second important point when raising capital is to have an “elevator speech,” with which to describe your business to potential investors.  Most investor types don’t have a lot of time or patience, so they are unwilling to listen for 10 to 15 minutes as you try to describe your business.  They want the bottom line.  What are you doing and how are you doing it.  What’s in it for them?

The third and main point of this post is to remember, when raising capital, that you should never be desperate, or come across as desperate.  The entrepreneurial world is filled with sharks, we know how to smell blood and go in for the kill.  If you come across as desperately needing 15 thousand dollars, there are some venture capitalists who will give you the 15 thousand, knowing you need 30 to 60, and take your company when you run out of money.  What’s the moral?  Play your cards close to your chest.  Be professional.  You need money, you have a great idea, it’s worth investing in, and investors are welcome to look at your plan to see if it is a fit with their style.  Look critically at your plan.  Are you asking for enough money?  Most entrepreneurs don’t and end up failing because of it.  When you are out of money, you are out of time.  It will take longer and cost more to get your business running and pulling in positive cash flow than you expect.  Plan for that.  Ask for the money ahead of time so you aren’t desperate on the back end, because when raising capital, that desperation spells disaster for you.

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