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Small Business Start Up Funding

Most entrepreneurs would rather spend time growing their business than making fundraising prospect lists, scheduling pitch meetings and asking for money because fundraising for startup businesses is typically a slow and painful process.

To get close with the startup financing deal the business should have successful track record or excellent sales ability. The reality of fundraising for many startup business owners is that it takes contacting at least four to five prospects before closing on aninvestor. But this poses a challenge since most entrepreneurs need at least 10 investors to put together a meaningful round of funding and the process of assembling 40 to 50 fundraising prospects is daunting.

  1. Closing date
  2. When raising large sums of money from venture capital firms and institutional investors, closing dates are critical. So the cost of a closing delay is a substantial.

    In practice, angel investors and other individuals who'll support the business will ignore the closing date and send the entrepreneur the money when they feel like it. Investors like to see a closing date because they like to feel that other investors are interested in the business as much as they are and investing at the same time. Hence having a moving target as closing date may get more investors but the existing investors may not be impressed by this.

  3. Investment opportunities
  4. Flexibility is critical when dealing with non-institutional investors. If the businessis raising money in the form of debt, it’s better to offer two or three options for participation in the round: different amounts or thresholds, different time horizons, and different repayment schedules.

  5. Follow up
  6. It’s best to end each meeting with investors with a definite plan for the next meeting. Even if the discussion can be done in one meeting, it’s better to spread it to two or three meetings since that might be how long it takes for the investor to get comfortable with the business idea and the entrepreneur. It's also a good idea to schedule reference calls with previous investors, partners, and board members to demonstrate that others are involved with the venture who can vouch for the business.

  7. Clear investor doubts.
  8. In the follow up meetings clear the doubts if any in the minds of investors. Addressing them straight forward and asking them if they have any doubts will also help the entrepreneur gather information on things which he is unaware of. It will also help in preparing better for any other subsequent calls.

  9. Stop selling.
  10. Once the investor has decided to invest the entrepreneur should be patient and complete all the procedural and paperwork activities. Further selling the idea to the investor is not advisable as he is already convinced and willing to invest.

  11. Do not delay collecting the check.
  12. After all the interaction the next important event is when the money is transferred to the entrepreneur. If the transfer of money is getting delayed it makes sense for the entrepreneur to request for check or find out how the money will be transferred.

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