Raising capital is a critical goal for many startups. For companies with an eye on aggressive growth, seeking funding and investment can provide the financial runway to hire teams, build inventory and fund R&D. However, it's critical to consider your long-term goals of securing funding when planning your business. Here are five factors to consider if raising capital is part of your growth plan.
1. Create a Powerful Business and Marketing Plan
The cornerstone of a successful funding pitch is a solid business plan and marketing plans. Invest time upfront to create strong documentation, which should answer the following questions in a concise and compelling way:
- What problem is your business trying to address, and what is your solution?
- How are you different from your competitors, and what makes that advantage sustainable? For example, do you have a unique talent or a patented technology solution?
- Who is your audience, and how will you market to them?
- Is each of your key points and assumptions backed up with reliable market data?
2. Use Industry Knowledge for Context
In addition to your business and marketing plan, you must be prepared to talk about how your business fits into the industry context. Investors want to work with founders who understand their industries deeply, through both first-hand experience and detailed research. Spend time learning about this area, and practice discussing the most important issues related to your industry. As part of your elevator pitch — how you describe your business in a few minutes or less — use your industry knowledge to put your business into context.
3. Highlight Financials and Revenues
Investors will evaluate your company financials closely. It's important to ensure that your full financial picture is available. Investors will be interested primarily in two areas: revenues generated and operating expenses. Revenue helps verify market potential and long-term return on investment to investors. In addition, be prepared to justify why each line item of your expenses are critical to your growth. Finally, consider having an outside accountant or auditor review your financials to ensure they're accurate and give additional weight to your projections.
4. Showcase Your Team's Expertise
You no doubt believe in the power of your leadership team. Investors must believe in it too when you're building a team to help you raise money. Hire people with strong track records of success, strong brand connections and the industry experience to navigate your field. At a higher level, showcase why your specific team's combination of talents can move things forward faster than your competition.
5. Articulate the Future Growth Story
Raising capital is about convincing investors you're worth the risk. An important piece of that story is how your industry will evolve in the future. Craft a story about demand: Will demographics support growth? Are major companies working on solutions that prove the market potential? Are there forces in play that no one else is paying attention to that could give you a competitive advantage? Help investors see why your company will stand the test of time.
Growth requires money, and outside investment can add rocket fuel to your trajectory. However, ensuring that your startup is ready for investment — and that you have the pieces in place to get investors excited about your company — requires advanced planning. Hire the right team, tell a compelling story and back it up with data, and you'll be well on your way to a successful startup funding round.