For many entrepreneurs, raising funds is an important moment in the life of their company, but how to successfully raise funds for a company ? Indeed, looking for external investors to raise funds requires a certain methodology and a good preparation beforehand. In this article, Advimotion gives you the different steps to follow to raise funds.
Advimotion is a financial consulting firm that assists startups and SMEs in obtaining non-dilutive financing and equity fundraising. We also act as advisors in corporate divestiture transactions to best represent the interests of sellers.
We offer strategic consulting and outsourced CFO services to ensure the financial and operational monitoring of your business. Finally, we take care of the drafting of investor documentation : business plan, pitch deck, creation of reporting files and valuation calculations.
For more information, please contact us.
Estimate your needs to determine the amount to raise
Seneca said: “There is no favourable wind for him who does not know where he is going”. Without a clearly defined target amount, it will be difficult to raise money because, depending on the amount sought, it is sometimes more appropriate to approach one investor rather than another.
To determine the amount to raise, you will have to estimate future expenses: what marketing, communication and human resources budgets will the company need to continue to develop? It is up to you to determine this.
Depending on the needs and the stage of maturity of the company, it will not be necessary to address the same types of investors. So, how can you raise funds for a company if you don’t have a global vision of the different investors present on the market ? Indeed, there are several categories of investors that are : Business angels, investment funds, corporates ventures or crowdfunding platforms.
Making a qualitative list of “good investors
A comment in a forum that said: “How to raise funds for a company without financial documentation? Just pitch your project to an investor in an elevator and you’re done. Unfortunately, this only works in the movies. In reality, you have to prepare all the financial documentation that the investor will read in his head even if you pitch your project in 1 minute in an elevator.
Overall, the financial documentation includes writing the business plan and the executive summary. If you are not an expert Overall, financial documentation includes writing the executive summary and the business plan. If you are not an expert in business planning, do not hesitate to call on Advimotion to assist you.
Negotiate the conditions of the fundraising
When investors are interested in your project, several negotiations and meetings will take place during which the investors will check every detail of your documents in order to verify your figures and estimate the growth potential of the company. This is the “due diligence” stage. Following this stage comes the exchange of letters of intent and then the signing of the shareholder agreement which attests to the entry of the new shareholders into the capital and the success of the fundraising.
Between all these steps, it took almost 6 months of writing, canvassing, meetings, pitches and intense reflection. Thanks to this article, you now understand how to raise funds for a company and the different steps that will lead you there.
Methods and tips for raising funds for a business
If you feel strongly about an idea, use the power of the Internet to raise the funds you need. Crowdfunding sites have become increasingly popular with inventors, entrepreneurs and the general public in recent years. They are easy to access and, if you can communicate your passion in your fundraising description, you may be able to get support from people around the world.
In addition, you can ask family and friends to participate in your crowdfunding efforts or borrow from them directly. People you know are often the best and safest way to raise funds.
2. Business Angels, the obvious answer to raising money for a business
Business Angels provide capital to a startup in exchange for convertible debt or equity. Many of today’s largest technology companies, such as Google and Yahoo, were funded by angels. Looking for a way to raise money for a company that is already showing signs of growth ? Angel investors are a favorable option.
3. Bootstrapping as an alternative to raising money for a company
If you don’t want to give up any form of ownership or independence, bootstrapping is probably the best option for raising money for a business. It’s about using your own resources. This may mean dipping into your savings or taking out a mortgage on your assets.
4. Venture capitalists
Like angels, venture capitalists provide capital to early-stage companies, early-stage companies and emerging companies with high growth potential. The difference is that they typically provide financing that often has a higher rate of return, rather than taking a share of the company. However, some may take a share of the company.
There are many microloan options for those looking for ways to raise funds for business growth or expansion. Loans remain a key option for businesses because they typically have fewer terms and conditions, shorter payment periods, and, in some cases, medium to low interest rates.
How do you raise money for a growing business ?
If you are looking for how to raise money for a growing business, explore the following options :
6. Purchase Order Financing, another alternative to raising money for a business
To receive large orders for products on a regular basis, purchase order financing is perfect for companies that regularly receive large orders for products that do not have enough cash to cover the production of the products until the customer payment is made. The idea is that a purchase order financing company pays your supplier the cost of producing the product. When the product is manufactured and shipped to your customer, your company invoices the customer and receives payment. This payment is then used to reimburse the purchase order finance company. While this is not the most affordable way for a business to borrow money, it is a viable option for those who are not able to obtain cheaper financing to fulfill an order.
Trade competitions are an excellent way to obtain funding because there are few, if any, conditions attached to the prizes. Competitions usually encourage creative businesses or social enterprises to enter.
8. Pre-sell products
Offer customers the opportunity to pre-order products before they are launched or on the shelf. Not only does this raise the funds needed to fulfill those orders, but it also gives businesses a way to gauge demand for their product.
9. Strategic partners
Strategic partners come in many forms, from suppliers to distributors to customers. While not direct financing, getting credit from your supply chain can help supplement your budget until your company is in a good financial position.
10. Incubation Programs
Business incubators are programs created to give new businesses access to the resources they need to grow. Incubators don’t just benefit businesses financially. They also provide mentoring, networking and relevant entrepreneurial training.
Find us on Medium if you want to keep reading.
Advimotion, your partner in growth.