22 November 2008 E-MAIL SEARCH Home Page Newsroom From the Top Business Buzz Marketing Mix Financial Focus Management Matters PR Points Web Wisdom Industry Reports Business Glossary Resources U.S. Gov. Resources      Knocking on Opportunity's Door, Part 1   Not so long ago acquiring funding for start up projects was considered child's play — any entrepreneur could do it. Indeed, the saying "throwing money in your face" became popular during this period. While it is no secret that the good times are gone and funding is down, there is still quite a stash in investment fund coffers. The trick is getting at it. How do you unlock the coffer doors? Knock on the Right Door The second part of this two-part series deals with how you can effectively prepare yourself and your presentation. At the outset, make sure you are knocking on the right door. VC funds are not the only sources of funding. There are angel investors, strategic investors, and, when all else fails, friends and families. Angel investors provide funding at very early stages, usually between $10,000 and $500,000. Strategic investors invest because it's beneficial to their business — through access to information or technology or by opening new market sectors. Friends and family invest what is known as "love money." They come through because they love you and hope that you don't love them for their money only. If the above options are not for you, consider approaching VC funds. They usually invest in start-up companies that are perceived to have excellent growth prospects but don't have access to capital markets. They are extremely focused, disciplined, hard negotiators, and careful about protecting themselves. Most often, they will take an active role in getting businesses up and running. Their experience and expertise are often beyond monetary value. Knock at the Right Time Once you have decided to approach VCs, it is essential to knock on their doors only after you have a clear picture of your business strategy. Don't confuse this with thorough knowledge of your technology. You are going to be asked some tough business questions. After all, these people are putting their money on the line and deserve on-target answers. Don't attempt to raise capital before you have prepared a comprehensive business plan. During the process of developing your business strategy, you will find yourself addressing many of the issues potential investors will raise. Positioning. Preparing a business plan will help you understand where you fit on your industry's map, which niche you intend to fill, and what you want to be when you grow up. Competition. You will need to look at how your target markets are solving the problem you intend to solve better, and see how others in your industry are making money. Revenue model. You will need to adopt a revenue model or possibly create a new one. Financial projections. Most importantly, preparing a business plan will force you to pinpoint your immediate business needs. How much capital do you really need? What will it be used for? Benchmarking against others in your industry is recommended to show potential investors the feasibility of your projections. Strategic partnering. Who do you want to invite to partner with you? What do they offer and what will you provide in return? Working with professional consultants can help you address these tough, make-or-break issues. Your Foot in the Door Often the hardest part of raising investment capital is getting your foot in the door. To improve your chances, choose potential investors wisely. Do your homework. Know what your potential investor specializes in. This is called doing diligence on the investor. Don't be embarrassed — it's an expected part of the process. Take full advantage of the Internet. Most VCs and funding organizations have Web sites that are explicit about what they're interested in, what they've funded in the past, and how to apply. When doing research, be on the lookout for synergies between your business and your potential investor's expertise; even similar hobbies and sports are important. After all, if all goes well, you'll be spending quite a lot of time together. The aim is to build a healthy, rewarding partnership in which both parties contribute. The more areas that converge the better. The ideal way to meet your chosen investor is to be introduced by a credible source or mutual acquaintance. If you don't have someone on the inside, check with your lawyer, accountant, banker or other local businesspeople — anyone who can put in a good word for you and smooth the way. The Grand Entrance Now for the grand entrance. Your business plan has been reviewed, and you are invited to an introductory meeting. This is your one and only chance to win them over. Put your best foot forward. Investors expect to see the CEO, marketing VP, CFO, and possibly the technical expert. Remember, investors are much more interested in the business aspects of your venture than the technology. They expect a return on their investment — the sooner the better. Be sure you have honed your presentation skills. You should be able to tell your story in a compelling, attention-grabbing manner. You will need to think on your feet and be capable of answering questions and dealing with issues as they arise. An impressive presentation does much more than describe your business. Viewers are consciously and subconsciously examining attitudes, personality, motivation, leadership skills, and business philosophy through body language and how effectively questions and issues are handled. The Trendletter team welcomes your comments. ©2002–2008 Trendlines International Ltd. All rights reserved. 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