However, there are fundamental steps for SMEs to raise a successful fundraising event. There are certain keys that can help you successfully breakthrough your potential investors’ scrutiny and help you raise money for your business.
1. Understanding Risks and Returns
The most important aspect of raising funds for your company is to understand who is going to contribute to the fund. Therefore, the most obvious question that arises is- What is the investor looking for?
Any debt or equity provider is looking for returns and revenue in exchange for providing the fund. Investors and venture capitals are here to gain profits from the shares and they expect a return that is higher than the potential risk. Hence, risks and returns are two important factors that you need to put forth in your case to make it a better pitch.
2. Risk Management Plans
Any investment company is not going to lend or invest money without learning about the risks your business is exposed to. An investor does thorough homework on your business including risks, opportunities, threats, and competition among others.
Therefore, your USP must include a strong risk management plan to mitigate challenges. Moreover, they assess the expected returns of the business and it should always be higher than the risks. A strong business plan coupled with promising returns with minimum risk is what the investors are looking for.
3. Credible Documentation
Underestimating the need for documentation could be the end of your entrepreneurship and successful fundraising. Every business person needs to dedicate time and effort to developing credible documentation outlining the strengths and weaknesses of their business. It needs to underline the conditions under which the business operates.
Important information such as how the entrepreneur manages the functioning is an influencing factor in fundraising. Elements like risk management, cashflow system, generation of financial statements, and the level of governance are scrutinized in SMEs.
Explaining the management, operations and other elements carefully and clearly in the documents builds trust in the investor or start-up incubators to come forward and invest in your company.
4. Highlighting USP and the Team
A business is not run single-handedly. Just like a business is not successful without creating a mark of its own in the consumers’ mind. Two crucial aspects of any business are their Unique Selling Propositions and how their team functions.
An investor is not investing in a business plan or in a pile of documents. They are investing in the hard work of a team and the uniqueness of their business. It is a unique element that makes the business poised for success; and the team that builds and takes that element to the market, of course. Hence, make sure your investors understand and learn more about these two aspects of your business.
Fundraising is not a one-day thing. It takes a while to get everything rolling and gain finances. Hence, patience and time should be something that you have. Documentation, auditing, and assessment may take months to get approved. Therefore, you need a strategic plan in place for the fundraising to be a success.