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| Image Source: appster.com.au |
Many entrepreneurs find it difficult to
navigate the options when it comes to raising capital for their nascent
businesses. The competition for investor attention can be fierce.
Twenty-eight
percent of business owners who attempted to raise capital last quarter
were able to do so from wealthy individual “angel” investors, up from
13% in the second quarter, according to a survey of 2,361 entrepreneurs
by Dun & Bradstreet Credibility Corp. and Pepperdine University’s
business school that was fielded from July 22 to Aug. 15. Meanwhile, 14%
were able to raise venture capital in the third quarter, up from 7% in
the year earlier period, the researchers said.
On
the Accelerators, a blog on the challenges of starting a business,
experienced entrepreneurs and venture capitalists shared tips on
attracting investors. Edited excerpts:
Be Confident, Not Needy
Venture
investors are well aware of the risks of building billion-dollar
companies, much more so than the entrepreneur. Your job is to get them
excited about a massive opportunity. Paint the grandest vision for what
your business will become. The best thing you can do in a pitch meeting
is paint a big vision of something that should seem audacious and even
outlandish.
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At the same time, you should
try to subtly convey that your deal is going to get done regardless of
their investment. Don’t come from a place of need, which we all
naturally repel. Create scarcity—let them know that this funding round
is closing soon, and that you’re really there to see if you’re the right
fit for each other.
Every investor wants to invest in a confident team. Having that certainty helps you walk the line between confident and cocky.
—Jason Nazar, co-founder, Docstoc, Santa Monica, Calif.
Seek Input From a Network
One
of the rookie mistakes many first-time entrepreneurs make is to be too
guarded about their ideas. Many will actually spend their first $25,000
on patent lawyers without ever fully vetting their product.
The
problem is that it’s hard to break through the clutter and get the
attention of top investors—they often look only at deals that come in
from a credible referral. There’s absolutely nothing more credible than
getting an endorsement from a well-known expert who has already put his
or her own money into your company.
The
only way to create a network like that is by sharing your ideas and
seeking input from experts, investors and potential mentors. Most young
entrepreneurs overestimate the chances of someone stealing their idea
versus the benefits associated with sharing it.
—
Scott Weiss,
partner at Andreessen Horowitz,
Menlo Park, Calif.
Don’t Aim for the Moon
“Valuation
sensations”—young entrepreneurs who are worth more than a billion
dollars—make great press.
Like magic, they seem to take ideas out of
thin air and turn them into large amounts of money, fast. While, these
youthful tycoons pique the imagination, they also distort our
understanding of how entrepreneurship works in America.
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| Image Source: rt.com |
The
entrepreneurial community and media need to challenge today’s
assumption that “real entrepreneurs shoot for the moon and raise big
bucks.” Aiming for the moon isn’t how the vast majority of successful
entrepreneurs created the bulk of the value in our economy. Let’s also
celebrate the entrepreneurs who create value via steady growth and
reinvestment of profits.
In the U.S.
about five million people every year attempt to become entrepreneurs,
according to the Kauffman Foundation. Typically, most funding for
startups comes from the founder’s savings, followed by loans on assets
such as cars and houses, followed by credit-card debt. But less than 10%
of all the funds invested in startups come from outsider equity,
Kauffman says.
Venture capitalist Douglas Anderson is skilled in turning financial resources into more profitable assets. Get more tips on business and investing here.
