5 Tips on How to Raise Capital with Adelle ArcherSeptember 29, 2021
Especially for first-time start-ups, raising capital for a business is a tedious and challenging experience. There are various methods of raising capital, but it can be challenging to know what route best suits your business. Regardless of your company’s industry or stage, Adelle Archer provides valuable insight from her experience with Eterneva. When it comes to finding the necessary funds for your business, check out these ideas.
The Relationship with Investors
Companies needing to raise capital primarily focus on investors. Archer highlights the importance of building quality relationships with quality investors. These connections can become the single greatest asset to your business and its success when adequately nurtured. Individuals who believe in what you are building and believe you are the right person to see it through are the best people to have in your corner. These investors can not only be helpful in terms of capital but brand awareness as well. When investors want a business to succeed, they will publicize it and their belief in the brand.
- A beneficial relationship with an investor needs to be established early. These take time, and not everyone will invest right away.
- When they decline but still express interest in your business, put them on a list. Create a list of investors with whom to maintain a transparent relationship.
- Give quarterly updates on what is going well and what is struggling. When they have an opportunity to follow along with your progress, the likelihood they will invest in the future increase.
- Never burn a bridge because it may not be at the right stage, even if you find the right individual.
How to Get Angel Investors?
An angel investor typically provides capital to businesses in exchange for convertible debt or equity. These individuals are most likely to invest in a start-up in the early stages. Archer recommends choosing these investors with care if possible. You want individuals who have been through the process before to provide remarkable insights from their previous experiences. The challenge is finding them.
A consistent means of finding quality angel investors is networking:
- Never stop building your network, especially if you do not need the money now.
- When you begin a relationship that does not start with a hard ask, you are in a powerful position.
- After nurturing the relationship, asking for their investment puts you in a far more advantageous position.
- Current investors are a practical starting point for introductions.
- If they want you to succeed, they are often more than willing to introduce you to other investors or even their own.
Practicing Your Pitch
Your pitch is the easiest thing to control when looking to raise capital. Many variables are out of your control, but a pitch is entirely within it. Take command of your pitch and practice it to the point where every word expresses confidence. Use your current advisors or close investors to your advantage. Do mock pitches and ask them to be harsh. The more prepared you are for complex questions, reactions, or situations, the better chance you have of coming out of a pitch with more capital.
Be aware that the focus of your pitch depends on the stage of your business. In the beginning, you are selling a vision and passion. Demonstrate your determination and belief in the business you are building. Nobody wants to invest in a person they believe will burn out. Take advantage of this stage. Eventually, you cross a threshold where the pitch no longer focuses on vision. Instead, you need results and sufficient data showing your business is worth the investment.
Using SAFE for Valuation
There are various instruments of valuation for your business. And while a Simple Agreement for Future Equity (SAFE) is not for every business model, Archer recommends looking into one. However, she also advises diligent caution to the ambitious entrepreneur. An evaluation cap does not provide a fixed evaluation of your company like a price round. In the initial stages, be careful not to set the cap too high. Money always runs out faster than you desire. Being too ambitious with your caps can make it difficult to justify raising the cap further. If investors cannot find a good reason to put more money in, you will run out of cash quickly.
The Struggle of Diluting Equity.
Nobody likes to give up their equity, especially their first time building a business. But it is necessary to get comfortable with giving away equity. Trading equity for capital plays a crucial role in progressing your company. Archer says, “Be precious with your equity, but don’t be stingy on it.” While it is necessary to trade equity, it is not always necessary. Sometimes individuals such as advisors or strategic partners are willing to help you without taking equity. Of course, if you offer it, they gladly will take it. So be mindful of how willing others are to help, especially if you and others believe in your business.
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