The Secret To Finding Money For Your Business
What is the secret to finding money for your business? You must ask for it.
Sounds simple, right? But it isn’t.
By far the most important issue facing most entrepreneurs is a lack of funds — for startup costs, successful operations and necessary growth.
Given this reality, you would think that where to find that money would be a very common question. But it isn’t.
In fact, after 20 years of online experience and strategic consulting, I can count on one hand the number of entrepreneurs who have inquired about money without being nudged to do so.
Is that surprising? What’s going on here?
If you are an entrepreneur, the purpose of this article is to do a little nudging — and to provide some concrete suggestions.
Finding money. Is it a poor economy, tightening credit markets or uncertainty about the future that causes entrepreneurs to initially disregard this business imperative? Not in my experience. Often, the problem is caused by blind optimism.
For those of you who have followed this blog for some time, you know that optimism is a key characteristic that I look for in entrepreneurs.
You must have a passion for your product or service, cautious optimism about your future success and a conviction that you can do better than your perceived competition.
But all of this requires cash. And you can’t keep your head in the sand waiting for the problem to solve itself — because it won’t.
It’s alright to be optimistic, as long as a you keep both your eyes open.
But Where Is The Money?
The purpose of this article is not to restate the obvious: Friends, family and potential joint-venture partners. If you’re running a startup company you already know this. It is both the most obvious and most accessible source of funds. So utilize it. These people have one thing in common — they want you to succeed as much as you do.
But after that what should you do?
Banks and the Government used to be viable alternatives, but not so much anymore. They have their own problems. So what’s left?
The answer is to find businesses and individuals that want to help, because doing so feathers their own financial nests: Venture Capitalists and Angel Investors.
One of the perennial debates in business strategy is the relative value of these two financial alternatives.
It’s a confusing and often confounding dilemma.
Additionally, changing conditions in the economy and current business practices make this choice even more burdensome.
So, what are the experts saying today?
With apologies to Guy Kawasaki, Managing Director of Garage Technology Ventures, for early-stage entrepreneurs the smart money today seems to be in the hands of the Angels.
According to Wikipedia, an angel investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.
For most entrepreneurs, angels may be your financial salvation. Here’s why:
Venture Capitalists Make Poor Partners For Entrepreneurs
- Venture Capitalists often want their money out too soon. They have little interest in good ideas that must be tinkered together in your garage. They want results and they want them fast. If your business is poised for immediate and substantial growth, then VCs may be your answer. Otherwise not. They expect your business to be scaled tomorrow — so they can exit with profit. You really can’t blame them.
- VCs are not looking for entrepreneurs, even those with commitment and vision, if they are in the seed-stage of development.
- Likewise, VCs don’t get excited about companies that are in the launch process, with products or services just hitting the street.
- VCs are looking for demonstrable results. They want to see meteoric sales growth, impressive cash flow and bankable profits.
- Lastly, you want a financial partner who is willing to get down in the foxhole with you. Given what you know about your chaotic business routine, wouldn’t you prefer a fellow entrepreneur to a numbers cruncher? Of course you would.
Angel Investors Are More Like You
- Angel investors are often visionary risk-takers, just like you.
- They understand the trenches as well as you do.
- As you lay awake at night trying to sort things out, you can call them. They are likely to be sleepless too — for the same or similar reasons.
- Angel investors can and will connect with you emotionally — not just financially. They are apt to share your vision, not merely scrutinize your spreadsheets.
- Angel investors are not afraid of change. And changes, whether tactical or strategic, will be commonplace as you move toward profitably. Your time is exhaustible and you don’t want to waste it explaining to accountants why you change your approach.
Searching For Angels
If you are an entrepreneur searching for angels, or you know someone who is, I am very easy to get in touch with and I am eager to help. Simply call the number below. During normal business hours, (8 AM – 5 PM Scottsdale, Arizona time), it is my direct line. Otherwise, just leave a message. If you would prefer to exchange email I would love to here from you. Just email firstname.lastname@example.org or click the email badge below. I promise I will get back to you within 24 hours.
If you found this post useful, you will love my eGuide — Trajectory: The Ultimate Guide to Building a Successful Business with Twitter