Several months ago, I had written an article on raising capital from customers and fans. I thought now was the time to write a follow up about it because I have gained more information about this topic.
Lot of people email me telling me that they want to raise capital for their businesses. The problem with many of them raising capital is they have unrealistic expectations.
Many of them expect the investor to fund 100% of the capital on a business based just on an idea. The business has no assets, no revenues just an idea. Yes, investors do fund seed stage businesses but for someone with no track record, it’s a long shot.
Imagine, you are an investor, a kid with a business plan shows up and says he’s got a great idea but no product or service and he isn’t putting any of his money on the table because he’s got no money and he’s also got no track record to back up his idea. What would you do? Obviously, you wouldn’t invest a penny unless you’ve been smoking crack and living in a cave on another planet for the last decade.
So, what is the right approach?
Try to boot strap initially. Try to get some money from somewhere – family, friends, sell some of your old stuff, sell your time (your services for money), do a barter, get some favors and try to pull up some money to get started.
Once you get started, build your product as soon as possible and start generating some revenues . Once these revenues are generated, you are in a way better position to approach investors.
Even if your product is a mediocre success, you have a way better chance of raising capital from investors than if you just had an idea and a business plan.
Also, remember to do your homework before you approach an investor. Get to know what investors are looking for and learn as much as you can about presenting yourself to an investor.
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Vinil Ramdev is an entrepreneur, business coach and author of several “ebooks” He is also founder of StartupGrowthExpert.com
Image: graur razvan ionut / FreeDigitalPhotos.net
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