Every few weeks I receive a question or two from an inspiring entrepreneur looking for an investment. Some of these brave souls ask directly for capital. Others ask for introductions to potential investors. Another group is looking for advice on how to begin fundraising. Very few of these requests come from businesses that are actually ready for an investment.
If you’re thinking about raising capital, ask yourself a few questions:
- Have I built any value? Very few investors invest in a raw concept. If you’re looking for capital, make sure that you’ve built real, tangible value. Do you have a product? Do you have customers? How about revenue, or even better, profit? If not, your chances of landing capital are slim, especially if you don’t have an entrepreneurial track record. Ideas on napkins, business plans, and great ideas fail every day. The more immature your business, the less likely you are to find any traction.
- Am I all in?Â Shouldn’t you believe in your business more than anyone else? If you haven’t burned the boats and gone all-in, you probably don’t believe in your business enough to convince someone else to help get you started. Entrepreneurship isn’t for the faint of heart and it’s a high-risk play. Have you quit your full-time job to focus on the business? Did you sink your life savings and mortgage your home to fund startup operations? The risk you take needs to be commensurate with the risk you’re asking others to take.
- Do I bleed humble confidence? Are you so convinced that your business is a winner that nothing will stop you from plowing forward? Good, that’s step one. Â Are you willing to do whatever it takes – even admit you were wrong – to ensure that it doesn’t fail? Probably not. Very few people have the humble confidence to both listen and not listen to naysayers at the same time. That’s right, building a business requires such confidence that you can plow through doubt while simultaneously discerning which criticism is valid and using it to align for success.
- Have I surrounded myself with scaffolding? Â Are you a lone ranger or have you found advisors, clients, partners, and employees that believe in your vision and are as passionate about your business as you are? Many investors bet on people (the entrepreneur), but strong leaders attract followers and partners. If you’re the only person that believes in your mission and you can’t get anyone else to jump on board without raising capital, then you either have a poor idea or are not the leader that can make it successful. You need both before you look to raise capital.