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Almost all startups have two things in common: first, they have a great idea that the owner or founders believe in, and second, they’re short on capital for expanding their operations. Startups begin with an idea and span into a business. It’s the idea, passion and drive that motivate the owners, but it’s the capital that keeps them in business. Without capital, the most successful business plans and innovative ideas will never lift off.
Capital isn’t always easy to come by, and often consumes a substantial amount of time in the beginning stages. Not everyone who offers to invest should be taken at face value, and many offers will be from those who have no interest in the company. Some of them don’t share the cultural values of what makes the business plan successful, and others will come with high interest rates or large stakes in the company. Capital should be understood as nothing more than a vessel, a means to achieve a goal, and not an emotionally driven decision by a desperate entrepreneur who will scrape up every dollar available, regardless of the costs. With that in mind, here are five tools that will help you generate startup capital.
The ability to find a venture capitalist with a few hundred million they’re willing to spare (without considerable hassle) is a near impossibility. While they do exist, they can be incredibly difficult to convince. Instead, try shooting for an entire crowd raising small sums of money. There are over 300 million people in the U.S., and for the right idea, most are willing to invest $25 dollars (as one example). Gathering up a few thousand people willing to invest $25 is much easier than convincing an investor to write a check for $75,000. In addition, many investors become customers after buying into your idea – and hence, product.
2. A Plan
Not just any plan. Have an iron-clad, foolproof plan that you have spent hours examining and improving. Your plan will be your greatest asset. Take objective criticism, learn from it, and realize that an emotional attachment has been the bane of many entrepreneurs. Any emotional attachment could undermine your plan, if it does not allow you to consider the weaknesses. Instead, it makes one more susceptible to failure. Having a plan is absolutely necessary, but developing the plan like a business instead of a hobby will play a major role in success. When looking for capital, your plan will be analyzed, shred to pieces, and you’ll be forced to defend most facets of it. Make sure it’s comprehensive enough to survive the scrutiny.
3. A Pitch
After your plan, your pitch is the next most important piece of the puzzle. A great plan with a mediocre pitch will not receive much attention or convince potential investors. Your pitch should contain an initial hook, followed by the vision, market opportunities, and what you’re asking. There are a number of different ways to craft a great elevator pitch, but your hook will definitely stand out as the most important aspect.
What began as the Service Corps of Retired Executives (now simply Score) is a great – and free – means to obtain advice from experienced executives who volunteer. Score has more than 350 chapters across the Unites states who specialize in helping young executives, entrepreneurs, and startups with a wide variety of challenges. This program is sponsored by the SBA, and offers expertise from writing business plans to growing your business. Securing capital is one of the many ways that Score can help launch your business. However, a mentor can help you considerably beyond securing capital, making this one of the most important steps a startup should take to building their business.
5. The Shark Tank
Every entrepreneur’s playbook needs one Hail Mary, one idea so out there and idealistic that you can always turn to in moments of desperation. And nothing exemplified one last mad dash for the American Dream like reality TV.
For those who don’t know, Shark Tank is a hit ABC show that brings in entrepreneurs to make their pitch to potential investors in from of a national televised audience. It sounds insane, and it is, but this has actually worked for some people.
But the advice we’ll give you to take to the sharks is advice you could take to any venture capitalist, so even if you have no aspiration for celebrity, it might be worthwhile to stay focused.
Be very precise in outlining what you need, what you’d like to see, and how you expect to achieve your goals with these numbers. Investors will want to know who you owe money to, how much the interest is, how much doing business has cost so far, and how well you manage money.
Startups require a special sort of personality to succeed. Having a good idea is the first step – but it requires considerable more than just an idea. The idea put into action becomes a prototype from which to refine and perfect the idea. Turning the prototype into mass production often requires financial assistance, and investors are the best place to find it. It’s important to remember that not all investors will offer the best means for financing, and many are more concerned with their ROI of the loan than your business success.
Capital is ultimately what will launch a product and provide the means to mass produce. To effectively secure as much capital as possible, consider crowdfunding. The terms are easy, and it can net higher than a single investor would be willing to give anyway. In addition, have a fireproof plan that’s comprehensive inside and out. Keep your pitch simple but effective, and master it using different scenarios.
Win big on Shark Tank or partner with a Score member as a mentor who can provide valuable assistance, and most importantly, stay organized (especially your finances). Utilizing these 5 tools will boost your odds of getting your startup off the ground!