Plus, entrepreneurs have to ask themselves many questions in the funding sphere. Do you go for crowdfunding or look for local investment? Do you try to find an angel investor or seek out a venture capital group? The questions are endless and the answers will vary depending on the business model. The following is valuable insight into the world of funding gathered during iKC panel, Geocashing Players from Pawns: Finding the Power Players to Invest in your Company.
- Put your own skin in the game: Starting a business is a major risk. By not investing your own money, you’re sending a message of doubt to potential funders. If you think, “Hey, I’m investing my time. That’s got to be worth something,” you’re still not investing enough. Your time is the measure of your effort. Your money is a measure of your passion. As panelist Kelly Pruneau of Women's Capital Connection put it, “If you don’t put your own skin in the game, what makes you think I will?”
- Ask people you know: Friends & family—we all have them. When you have an idea that you’re passionate about and you know could be big, don’t be afraid to ask. Whether it’s a well-off uncle or a friend from college, the worst that could happen is that they say no. These people may also have wisdom in that field that will allow them to help in other ways
- Look to the crowd for answers: The great new trend for startups is to get crowdfunding. Sites like Kickstarter, Fundable and Gust all allow you to pitch your idea to millions of people who, in turn, can become potential investors. However, according to Rachel Qualls of Angel Capital Group, it’s important to “gather credible local investors first before looking to crowdfunding”. She also suggests, if possible, to accumulate 90% of your projected needed capital. This way, you’re dealing with people you know. You’re more likely to hear from the person who gave $5 rather than one who gave $5,000. She went on to say that due to the popularity of these sites, it is becoming increasingly harder to “rise above the noise”. Giving insight into the mind of potential angel investors that view funding portals, she says, “Don’t pay for extra listing fees that promise to increase visibility. Investors don’t care for it. Instead, they look for what has already be raised and how quickly it can become liquid.”
- Know the rules before you get into the game: The recent popularity of crowdfunding has brought about the good folks of the Security Exchange Commission. On May 7th, 2012 they issued guidance to prospective crowdfunding intermediaries under the Jumpstart Our Business Startups (JOBS) Act (H.R. 3606). This measure was taken because the current crowdfunding space looks a lot like that of the stock market prior to the major crash in 1929. A full list of SEC guidelines for crowdfunding is available here.
- Know everything: Investors understand that you are passionate about your business. Don’t spend 14 minutes of your of 15-minute pitch only talking about how cool your business idea is. The investors aren’t really investing in the business. They’re in vesting in you. They want to know if you can do what you say you will. Have you done a reasonable financial forecast? Have you researched the market and potential competitors? What role do you expect from them? These are some of the questions that investors want to know the answer to.
- Don’t just look for a check: You want to find a sophisticated investor, someone who has already had success. Nine times out of ten, their wisdom is more valuable than their money.
- Don’t be afraid to Think Big: There are many obstacles you may encounter along the way, but that shouldn’t get you down. When you have the opportunity to pitch to angel investors, be optimistic and fearless.
Getting funded is a major undertaking. You may hear the word “no” 100 times but one “yes”. That “yes” is all it takes to make your idea a reality. Whether you ask friends and family, seek out angel investors, or look to crowdfunding, there is one thing that is universal: people invest in you.