5 Facts You Must Know About Raising Capital To Start A BusinessKehinde LAWAL
According to Kim Kiyosaki(wife of Robert Kiyosaki; author “Rich Dad, Poor Dad”), raising capital isn’t really the mystery many make it out to be. Lenders and investors (such as banks, private organizations or individuals) simply want to know that they are going to get a healthy return on their investment.
This means people will only Borrow you money when you show that you’re capable of increasing the money, or multiplying te initial capital invested.
So, the key to raising money comes down to five fairly simple factors that will help demonstrate the ROI they are seeking. I’m going to help you cut right to the chase with my efficient formula:
5 Facts You Must Know About Raising Capital
1. Project: What is the project the lender is providing you capital for? What makes this opportunity unique and attractive? Don’t just share the positives—also explain the negatives and how you plan to overcome them.
2. Partners: Who are the key players in the project? In other words, who’s putting the deal together and what is their track record? The experience each partner brings to the table, and thus their expertise, is a big part of the equation.
3. Financing: Show the investor, as accurately as you can, how the project (either a business or investment) will make money. Be realistic and don’t avoid discussing the roadblocks ahead—every business and investment project has problems, so pretending yours won’t makes you look like an amateur. You’ll want to show how much money you’re raising in total, where the money is coming from (private parties, traditional lenders, etc.), the terms of the money being borrowed and how the money will be allocated. Hint: If you even suggest that any of the money raised will be used to pay your salary, doors will close. If you want a paycheck, then go get a job. Potential investors want to know how soon they will get their initial investment back and what their return will be, so they will use all these numbers to determine if your financing structure and terms are attractive.
4. Management: Investors want to know who’s running the day-to-day operations, because this is crucial to the ongoing success of any venture. Explain who they are, their background, how they react under pressure, etc.
5. Clarity: I personally added this last point because many startups in Africa fail because of unclear goals, skills and expectations. Most African startups higher incompetent employee because they’re not clear with the roles/skillset needed by each team members. If you intend to raise money, you must know exactly what you want.
I know it can seem intimidating at first, but raising capital does not have to be a long, drawn-out affair. Your pitch to investors should be short and concise. If you can clearly and confidently address each of the four aforementioned issues when looking to raise capital, then the odds of securing the financing you seek are in your favor. Now, the only thing left for you to do is deliver!
Source: RichDad.com Blog