06/04/2021
Pause: Pre-seed, Seed, Series A, B, C+ …
__You will never get capital until you understand what it is!
I have told this story before: My first business was an electrical contracting company called Retrofit where I would often bid for major engineering projects such as new high-rise office parks. The most important cost for me was buying materials for each project.
At the beginning, I would borrow money from the bank, which was always keen to give me the money once I demonstrated I could get jobs done. But loans are expensive, most of my margin was eaten up by bank interest charges, and I did not like it! So one day I went to see a supplier who supplied all my materials [an electrical wholesale supplier].
I showed them how much I bought from them, and then made my pitch: “Supply me on extended terms, and we both win.”
The materials supplier sent a team to visit my business. They looked at my books and reviewed my . They looked at my . Then they went to see my customers to see how well I had completed my jobs ( ). I encouraged them to do all these things.
They started me on a small quantity, then they increased it as my reliability was established.
They even proposed some changes in how I ran my operations.
They were making money, I was making money, but most importantly for me -- I was growing, and pumping every spare cent back into the business.
I had just secured my biggest amount of ever (at that time)!
The banks did not see me again.
I was gone! No longer limited by constraints I grew rapidly and became so big that one of the suppliers eventually had to buy me out.
What happened here?
Think, think, think!
This principal established was something I would come back to again and again, on even bigger and bigger initiatives!
I used it to build mobile networks in Africa!
In some cases, I bought entire businesses using this approach.
This is why Matters: You show competence, and you are on the road to getting your capital.
Now as your startup grows there will be different types of capital you are qualified and potentially ready to access, to help you move your company to the next level of growth... (Check out Afterthoughts 2 & 3!)
And right from the get-go, you sometimes have to be ready at a moment's notice, to make your pitch. I have talked about pitching a lot before. If you are an introvert, you are still going to have to master this skill if you want to raise money. Practice, practice, practice!
There are several approaches but at the very least, your fundraising pitch (and pitch deck) must include:
# Problem/Solution
# Value Proposition
# Business Model
# Competitive Analysis
# Founding team
You also obviously have to talk . Last but definitely not least: How will you (and the investor) make money?!
Finally, remember…
“Skilllful pitching… is a necessary, but not sufficient, part of raising capital. Most important are the realities of your organization: Are you building something meaningful, long-lasting, and valuable to society?” Guy Kawasaki
If not, seriously consider going back to the drawing board.
To be continued. . .
Image caption: Raising capital from investors is not like randomly casting your net upon the waters, hoping and believing there will be a good catch. You need to do your homework, and ensure your , , and are ready for investor scrutiny. Whether you're just getting started at the Pre-Seed or Seed stage of capital raising from friends and family... or much further along: Be prepared!
