6 THINGS TO CONSIDER BEFORE GOING FOR INVESTMENT

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HOW CROWD FUNDING IS CHANGING THE INVESTMENT LANDSCAPE

6 THINGS TO CONSIDER BEFORE GOING FOR INVESTMENT

To fund or not to fund? Isn’t that the big question for entrepreneurs!

I attended a focus group between 30 female established and aspiring entrepreneurs which revealed there’s more to consider when going for investment than just the financials.

Here’s our six nuggets of wisdom on whether to fund or not to fund:

1. Exit strategy

It may be counterintuitive to start with the end in mind, but if you don’t know where you’re heading, how will you know (and your potential investors!) where the business is going and how it will monetise in the long run? Many business owners know how their business runs, and even how it will grow, but few have a clear exit strategy. Knowing what exit you want determines where the funding will be best injected and which investor will be best suited for you and your business.

2. Know your business model and growth strategy

Seeking funding should be an intentional and calculated process of cost (in terms of control, time and risk) and benefit (financial, expertise, growth speed). Getting funding is about one thing: getting closer to your exit strategy. Even if your exit strategy is to build up the business to X amount of clients in Y countries and create a legacy brand that continues forever to be handed over to your children, the investment should plug directly into reaching that vision. Have a clear plan on how the funds will help you get there and how that will affect the bottom-line.

4. Research your options

So you have your exit strategy in place, and an idea of how potential investors can get a return on investment, now what? There are, despite how it may feel moments of impatience and even desperation, tons of funding opportunities out there. If you have a solid plan, a verified concept that you believe in and are committed to, the next step is finding the right support structure – and that includes the right funding. Seed funding? Crowdfunding? Angel investor? Bank Loan? Do your homework and use your business plan to guide your decision.

4. Find right type of investor

Cash only comes in one form but investors come in many. Rather than following the cash, follow who and where it comes from. Be fussy. It’s your business, your baby, and getting an investor is like gaining an adoptive parent. Choose an adopter who shares your values, your approach to nurturing growth and the future of your business. Do you really want to deal with an adoptive parent who’s a pain the ass and you can’t stand because they’re too domineering and want your baby to grow up too quickly? Go on dates, check them out, and make sure you click. Nothing can dampen the startup journey quicker than a soured relationship or legal dispute, which are often much harder, both practically and psychologically, to resolve than any financial issue. In these situations, you need to also choose with the heart as well as the head.

5. Know what you’re willing to compromise

Extra investment money in the bank sounds good, doesn’t it? Well, it comes with a price, so make sure you know exactly what you’re willing to pay and for what gain. Many startups go to bed with investors and find they’ve compromised too much: they lose control, direction or find they can’t keep up with the returns agreement. If giving up shares, make sure you withhold majority stake of the business (seek expert advice) and that you are aware of how much control you will be giving up and how much your investor plans to be involved with the business. Like it or not, having investor on board means you have someone to answer to.

6. Funding can be a real blessing

It’s just about being realistic about what’s involved with the funding process. Once you complete all due diligence and make informed choices, you’ll fly! Funding is about getting to your dream and vision, sometimes at an accelerated rate, and there are people out there who will share your vision and will even go on the journey with you. The entrepreneurial process is about having the conviction, the passion and know-how to pursue your dream. Go get it!

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