Points to keep in mind for a business looking for funds

Most businesses have to look for financial options at some point in time.  Startups have to deal with starting costs in which working capital is required to grow and build a sustainable business. There are some decisions that need to be made which are quite common and are taken by every business which is looking forward to growing.

The business that the person has, states the financing options which include age, position, performance, market opportunities and trends, team, and so forth are important. So you should filter your funding search and the approach.

Let’s start with a check on different factors as the outlook for funding depends on the specific details the startups look after.

# 1.Your well-written and convincing business plan and pitch are presented to investors in detail but they don’t invest in a plan, they invest in your business, invest in the growth opportunity they see which includes scalability, the problem that you are solving, what is the market size, competition if any.

The rare cases are there in which investors may know an entrepreneur well and are ready to invest at an early stage. In that case, they invest in an entrepreneur, not the plan.

#2. You should have a business plan. I am not saying that you should not. It’s an essential piece of the funding puzzle, explaining what are you looking for and expecting from the market, the customers and the investors, what are you targeting, and how long it will take to earn back the money invested by the investors.

Investors will look first at the synopsis and then a pitch. During the early stages, they’ll expect you to have a business plan in the background, for your own use. Don’t get caught without one if they ask to see it.

Few points to mention are below:

1. Venture capital

The business of venture capital is perpetually misunderstood. Many startup complaints about VC firms for failing to invest in new ventures or can say a risky venture, they talk about their ravenous business practices because they link like a horde, each looking for the same kind of deals but that is not the case. The VC business is just a business, the members we call venture capitalists are members who are charged with investing other people’s money. They come up with a professional responsibility to reduce risk as much as possible. It is essential to produce the risk/return ratios that the sources of their capital ask of them.

They can’t afford to invest in startups unless there is a rare combination of product and market opportunity and proven management. They look for a business that they believe could produce a huge increase in business within the next few years.

They focus on newer products and markets where they increase a sale huge multiples over a short period of time. They try to work with proven management teams who have dealt with successful startups in the past.

2. Angel investment

The angel investment is much more common than venture capital and usually is much more available to startups, especially at earlier growth stages.

Although angel investment is a lot like venture capital, there are important discrepancies.

  • First, angel investors are groups or individuals who invest their own money.
  • Second, angel investors tend to invest in companies at earlier stages of growth.

A business that moves forward with venture capital typically first grows and mature having started with angel investment in the first place.

Like venture capitalists, angel investors normally focus on high-growth companies at the early stages of development. Don’t think of angel investors for funding for placed, stagnant, and low-growth businesses.

Words of warning:

Sadly, financing and investment involve money; and money strains some ravenous business practices, scams, and such. So here are some reminders to help you avoid the pitfalls.

  • Some investors are a good source of capital, and some aren’t. The less established sources of investment should be handled with extreme caution.
  • Never proceed without doing the legal work properly when spending someone else’s money, make sure they are signed and have it done by professionals.
  • Never spend the money that has been promised but not delivered. Often companies get investment commitments and contract for expenses, and then the investment falls through.
  • Be aware that turning to friends and family for investment is not always a good idea. The worst possible time to not have the support of friends and family is when your business is in trouble because you risk losing friends, family, and your business at the same time.