By Wesley Lynch, Realmdigital CEO
Though almost every entrepreneur encounters some obstacles, here's some guidance on how to navigate them.
First, pick the right funder
Venture capital (VC), growth capital and angel investors are the early-stage funding mechanisms of choice. They play their parts at different stages in the maturity of a start-up business, and accept varying degrees of risk. Of these, angel investors are the easiest to convince. They invest smaller sums at the very early pre-commercialisation stages of the business, when activities are still relatively low-cost and the venture doesn't yet have a proven track record.
Couch the proposal in terms acceptable to an angel
If you're looking for support within the range of R1 million to R10 million, you're in the ballpark. Anything less and the idea will seem too easy to copy. Anything more and you’re moving into later-early-stage investment territory, including VCs. And make sure your business model has an aggressive revenue projection. Angels aim for a return of roughly 10 times their investment within five years. Ideas must be able to get to prototype quickly and have high growth potential.
Funders and entrepreneurs often don't communicate their requirements clearly (or early) enough. As a result, applications often fall through the cracks because of a basic mismatch. Have clearly defined goals and a crisp definition of the product.
Be exceptional and innovative
Don't pick copycat industries. The Richard Branson Centre of Entrepreneurship points to popular choices in certain geographies, but mere imitation is a no-no. Most entrepreneurs tend to focus on popular fields like green, bio or tech, but any business with a potential for high growth qualifies for investment. So don't pick me-too business models. Advertising revenue is not that compelling on its own.
But it's not that simple
Don’t think it's quick and easy to get funding - in fact it's a fairly lengthy and above all rigorous process.
Does it tweet well?
Have an easily digestible value proposition and core business statement. It must be short and simple as well as compelling.
Got the right help?
Pick the experts to support you and integrate them into your start-up. You must have deep industry expertise on your management team, because hiring consulting expertise is not cost-effective.
Bend over backwards to make the relationship with your angel work, rather than signalling that you might be high maintenance by making a small issue insurmountable.
Remember, you're the one who wants something. Don't expect the investor to jump through hoops, for example by signing unnecessary NDAs. Don't keep any crucial elements of the business plan to yourself either.
Connect with your investor beyond just the business relationship – include the investor in your business.
Don't sit on a goldmine. Act now, perfect it later. Many entrepreneurs have bad experiences, but often they could have done better with the right approach. With the right idea, presented well with the right attitude and dynamism, your business can get off the ground.
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