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There is something about building a company that gets the adrenaline going. The late-night meetings, bottomless coffee, and tons of ideas freely flowing all add to the excitement. Everything seems to be going smoothly as planned until you realize that these ideas need funds: someone else’s money! 

You are not alone. Most companies start this way. The thing is, raising capital to start a company or grow an existing business is tough. A well-rehearsed pitch is not sufficient to convince the venture capitalist to part with their own money to fund your project. In a recent survey, 66% of entrepreneurs found it hard to get the capital they needed to start or grow their business.

Why is it hard to get funded?

Many founders have a common notion that venture capitalists will jump into any random high potential startup they come across. Unfortunately, it is more complicated than that. Venture Capitalists do not base their decisions on whether they like you or your idea or not, or that they think the industry has high potential or the number of people investing in a company.

Investors, especially the seasoned ones, have what they call an investment thesis. Investopedia describes it as a “reasoned argument for a particular investment strategy, backed up by research and analysis.” This ensures that the VC sticks to what they know because most venture capitalists are highly specialized. It is their way of avoiding an emotional response to a particular market which makes them invest haphazardly.

It is, therefore, crucial for you to break through this barrier put up by investors if you want to win them over. Here are some tips.

Capital raising tips

It is always a great idea to come to a meeting with prospective investors fully prepared since they will assume that you already have the basics in place before you request funds. 

1. Prepare your business plan.

You should present your current state as well as your plans for the company. Explain thoroughly the industry in which your business is going to operate. Your business plan must show who you are going to compete with, how you are going to be different from them in terms of your product, management, marketing, distribution, technology, client reach, and your competitive advantages.

2. Demonstrate a solid understanding

Your prospective investors will want you to illustrate your knowledge of your target market. This will include the size of the market, your customers, accessibility, the potential for growth, demand, and intellectual property issues.  Being up-front about competition and threats is also key; as it is always better to present you SWOT (Strengths, Weaknesses, Opportunities, and Threats)vs waiting to be asked these tough questions.  

3. Know your numbers

As the founder, you probably know the history as well as the current and projected numbers of your business. Auditors should check them before you present these numbers to investors. Potential investors will want to see if you have a deep understanding of the numbers that form the basis for your business strategy and all assumptions upon which they are based. 

Most investors usually look for the Customer Acquisition Cost (CAC) and the Customer Lifetime Value (CLTV). CAC refers to the cost of gaining new customers, while CLTV predicts the net profit you can gain from the entire relationship with a customer over time. 

4. Be ready to answer tough questions

These are a few of the potential questions an investor might ask you during a meeting.

1. Who are your customers? 
2. Who are your employees and suppliers?
3. Who are your competitors?
4. What is your strategy when it comes to the product, marketing, and business units?
5. What role does government regulation play?
6. Where are your markets?
7. Where are your facilities?
8. How much are the costs for your business and investment plans?
9. How do your operational and marketing plans work?
10. Why are your leadership and management plans important?

The success of your pitch will partly hinge on your answers to these questions.

5. Show investors a return on investment

Demonstrate to prospective investors a clear justification as to how you are going to use the funds from the capital raising. An ROI is crucial if you are to convince the investors. Also, give a clear exit strategy and timeline; something all investors are looking for. They often purchase shares at a particular price hoping to sell them for a higher price in the future.

6. Identify risks

Identifying risks and creating a plan on how to mitigate these risks will likely answer many of the questions investors may have. 

Simple Agreement For Future Equity (SAFE)

One option for you to raise funds is through SAFE. Experts have noted that it is easier and more convenient to use for founders than convertible notes. It is a contract between a founder and investor that has the same conversion features but without the debt. It has no set maturity dates nor accruing interests.

While startups welcome SAFEs, the concept itself gets mixed reactions from investors. It is primarily due to the maturity date concept. The good news is that SAFEs have a good track record of payback. For entrepreneurs, it is a less complicated structure and a simpler way of getting funding.  

Final thoughts

It helps if you can get creative in trying to raise capital for your business. One of the best ways to raise money is through your initial satisfied customers and their referrals. Cut costs where you can: lease equipment instead of buying, and outsource services where applicable. Finally, get a mentor who can help you in this process that specializes in your niche.  Thinking like a VC and getting in front of VC’s who have experience in your market and invest in your niche can be the key that unlocks your funding success.

Raising capital is easy. All you have to do is stare at your phone and wait for investors and lenders to call, or look at your emails until your eyes bleed.

Is this the situation you are in?   Many builders, developers, and investors looking to fund their real estate projects are often too busy in the details of their projects to put time and effort into fundraising.

You are not alone in your struggle. Many are able to fund their real estate project out-of-pocket, but it is often necessary to raise funds if you want to scale your business in order to achieve the kind of financial freedom only real estate can provide. Taking part in this industry can be easy as long as you have the passion, the patience, the necessary information about real estate, and of course, the capital.

If you do not have all the funds you need to seize on a real estate opportunity, there are simple ways beyond shelling out money from your own pocket; OPM (Other People’s Money).

What is OPM and where to get it?

OPM is a popular method of funding a real estate project without having to go to the banks or mortgage lending companies. Instead, you go to silent partners who have the money to invest in hopes of getting back some handsome returns but do not have the time nor the interest in doing the work themselves. These people can be your money partners.

However, keep in mind that potential money partners exercise due diligence too. They may receive dozens of pitches, so it is advisable that when you approach a potential partner, you should already be prepared with your strategy. Even veteran real estate developers fail to close the deal sometimes. 

How to raise funds for real estate?

Private money partners will always practice due diligence, and each one will have their criteria in choosing where and when to invest their money. Knowing what these are will give you a good advantage. Here are 5 simple things you should do to attract money partners and raise capital.

1. Show them it’s worth their time

Many investors have invested in low yielding real estate products because they look for easy ways to get their money back if things go wrong. They feel that these types of products are safe for their money and will make a profit. The point of this is that you will have to prove to them that their money will be in good hands if they decide to invest with you. Show them that you know how to protect their capital.

2. Realistic returns 

Remember SMART goals? Investors are aware of this, and if your pitch offers heaven on earth, you might come across as a scammer. Set achievable and realistic goals for them. Even though you will likely need to show aggressive growth projections at or above average market rates, be careful not to make promises that are too lofty. It might be better to underestimate a bit and over perform. If this happens, then you will surely be their go-to partner in the future.

3. Portfolio

Investors will certainly take a look at what you have done in the past because this will be their basis for predicting your future performance. Show them what you have been successful with in the past. Show them facts.

4. What is in it for them?

Let’s face it, investors have selfish reasons for funding your projects. They are not in it because they want to help you. Whether it is to make a profit or to look smart in front of their bosses or colleagues, they want value for what they are paying for. Give it to them.  ROI is key. 

5. Build relationships

The personal dynamic should never be underestimated.  Given equally presented returns, deals are often chosen based on a connection or feeling that a person is like-minded.  Businesses are always built on trust, and there is no other way to do that than by building relationships. Creating rapport, having commonality, showing understanding and appreciation are the building blocks of a trusting relationship. 

Conclusion

Raising funds for your real estate project may not exactly be as easy as waiting for your phone to ring or checking your emails, but if done correctly, it is also not that hard. As long as you know how to find money partners, and know what they want and how to give it to them,  you will be able to raise your capital.

An ideal sales pipeline never happens on its own. Some of the best sales teams find themselves faltering at times.  Even if you already know how to manage a sales pipeline, here’s a refresher with some helpful tips to make it a more seamless process.

Step 1 – Do not forget to follow up

They say that people these days have a short attention span, but the truth is, they just have plenty of choices.  With that said, buyers need more help in deciding which products or services to buy.  According to research by TeleNet and Ovation Sales Group, in the past, it took an average of 3.68 calls to close a deal.  Today, it takes at least 8!

One solution to this is to set a reminder that would tell you that you need to follow up with your prospects.   Just call, don’t let one rejection slow your momentum. 

Step 2 – Pay attention to the best leads, and drop your dead leads

Make sure to turn your focus to the most sales-ready and high-value leads and avoid getting sidetracked on achieving your target.  You can do this by sorting your sales dashboard from high to low and not by date; in this way you can see which leads are more valuable to your business.  Having a clearly painted picture of your ideal target customer will also aid you in strategically focusing efforts on priority targets. 

At the same time, learn to let go of leads who clearly stated that they are not interested, or when you can no longer contact them.  It may be difficult to let go, especially when you have invested your time building relationships with them, but you will have to move on to avoid wasting precious time.

Step 3 – Monitor your key sales metrics

Monitoring sales metrics is an effective way to see how any changes you make to your sales process contribute to overall growth.  Sales pipelines are designed to be dynamic; they change all the time.  This is why you will have to constantly track your key sales metrics, which includes the number of deals in your pipeline, the average size of deals, the average sales close rate, and the average sales velocity.   Do this on a weekly basis.

Step 4 – Consistently improve your pipeline process

Take a cue from the best sales organizations and regularly review your sales pipeline and techniques to ensure that things are finely tuned and highly optimized.  Everything can be improved, from the scheduling of follow-ups to the offers that you make. 

If you make changes one step at a time, and evaluate as you go, your sales pipeline will quickly become more productive. 

Step 5 – Create a standardized sales process

Your ideal target customers have a lot more in common than you think.  Their needs and reasons for buying from you are all similar, which is something you can use to your advantage.   The best sales teams follow a standardized sales process, and this enables them to win new business.

Sales teams create a buyer persona, a fictitious representation of their ideal customers that are based on actual research and real data. When done correctly, having a buyer persona allows you to position your products to meet customers’ needs.

Customizing sales techniques takes time and adds enormous overhead, and this impacts your bottom line.  A standardized sales process can scale your business as it grows.  

Step 6 – Create more content for your prospects

These days, phone calls and emails, while an essential part of the sales communication, may no longer be enough for your prospects.  They often require more in-depth information to help them understand your products or services.  Plan out the kind of content you can give your prospects for each step of the pipeline. 

It even becomes more important as your prospect moves further down the sales funnel.  

If you are not sure what topics to write about, listen to what your customers are asking and saying.  Hearing them speak can give you insights on what they are interested in.  Both the sales and marketing teams should work together to create content that prospects are willing to read.  In fact, beyond written content, videos are conclusively shown to garner much higher engagement.  Taking the time to create polished explainer videos for different aspects of your business can be high-impact content.  

Step 7 – Manage your sales with a CRM

Conclusion

A CRM platform will help you manage all of your company’s relationships and interactions with current and potential customers, especially when your business grows.

Without a CRM, your sales pipeline would be in disarray.  CRM software is now an integral part of sales, so much so that sales teams rank a CRM as their second most important tool, according to a LinkedIn survey.  A CRM will help you track metrics, manage large volume leads, and give your team easy access to the right information when they need it.  

Raising capital in the form of funding rounds is about more than just the stages of soliciting money to help a young business stay afloat.

You will get a better perspective when you understand the meaning of different funding rounds; that is how you will be a wiser investor or entrepreneur – or at least an educated one.

So, here are 4 important types of funding defined more clearly:

1. When Seeds Planted turn into Angels

You are what they call a startup entrepreneur and convinced that you have a bright business idea that you cannot wait for the world to benefit from. So, you seek the help of similar-minded friends to start the business, with each of you contributing to the capital from your own pockets. Eventually, your families and other relatives become convinced and decide to invest in your idea. This initial fund gathering is called the seed round.

According to equity crowdfunding platform Seedrs, a funding round is anytime money is raised from one or more investors for the business. Each round after the seed is given a letter such as A Round, B Round, C Round, etc. which pertains to their chronological order of funding rounds. Investopedia will refer to those rounds as a way of growing your business through outside investment.

During the seed round, otherwise known as bootstrapping, when your company is in its initial phase and most outside investors may not back you up due to your company’s lack of track record and risk of failing, wealthy individual investors may come to your rescue.  They are aptly called Angel investors. These Angel investors who are focused on early-stage companies may invest through equity crowdfunding and organize themselves into Angel Networks or Angel Groups. Angel rounds may not be separate to the seed round, thus forming a hybrid. 

2. Series A Round

Reaching A Round, (also known as Series A financing or Series A investment) will be considered an important milestone of your company. According to Fundz Pro, after the angel-seed round, your company needs to show that you have a Minimum Viable Product (MVP) to gain an A round – not just an exceptional team or idea. As reported by Pitchbook, between 2007 and 2015, the seed-to-Series-A graduation rate dropped from 35% to 7%, making the post-seed gap as the top cause of startup death.

At this stage Venture Capitalists (VCs) will provide capital to your business in exchange for the first series of preferred stocks, after the common stocks were issued during the seed round. VCs, as opposed to Angels, together with institutional investors, tend to invest other people’s money.

Fundz Pro suggests the following for your company to get A Round Funding:

•         Join an Accelerator – these are fixed-term, cohort-based programs that include mentorships and culminate in a public pitch or demo day. It is said that approximately one-third of startups that raise Series A funds go through an Accelerator. Remember that the primary factor tested for acceptance into leading accelerators will be your team.
•         Leverage Your Network – Although joining top-tier accelerators gives you the best statistical chance to get Series A funding, only 2 percent of applicants are accepted. Startups that successfully raised Series A without going through the said route, did so by networking early and with influential investors, whether they are Angels or VCs from leading venture capital firms.
•         Extend and Nurture Your Network – You should continue to nurture and leverage angels and micro-VCs connections even before thinking of pitching them. Building and nurturing relationships before starting your Series A tour will improve your odds dramatically.

3. Series B Round

After having your team and product developed, it’s now time to take it to the next level to show strong achievements. By this stage, your company will have a higher valuation, with track-record and lower risk than before. Your company has already developed substantial client bases, growth in revenue, and success of products and services. You have proven to your investors that you are prepared for success on a larger scale.

Series B is the gas that you pour in for growth with a larger investment round. This is the time to bulk up on your sales, advertising, tech support, business development, and employees. At this time, your company will have valuations between $30 Million and $60 million, with an average of $58 Million. The average estimated capital you can raise during Series B round is $32 Million.

Series B will often be led by many of the same characters as that in Series A. The difference with this round is the addition of a new wave of other VCs that specialize in later-stage investing. 

4. Series C Round

If your company has reached the Series C funding sessions, it means that you are already successful. Now you are prepared for rapid growth. At this stage, you are looking to make acquisitions of competitors, increase market share, and scale up or develop new products. You may even be poised to develop on a global scale.

At this point, you may enjoy a valuation of $115 Million or higher, which is founded on hard data rather than expectations for future success. Just like many other companies, you use Series C funding to help boost the valuation of your company in anticipation of an IPO. 

Now, that your company has already proven to have a successful business model, more investors come to play, such as hedge funds, private equity firms, investment banks, and large secondary market groups. These new investors will invest vast sums of money into your company as a means to help secure their positions as business leaders.

Start up capital is the amount of funding needed  by the owners and investors to start a business.  

Startup financing has many myths.  Whether you are a beginner or a veteran, these myths can be so widespread that it is difficult to figure out what is fact.

We have done some digging into the most pervasive myths surrounding startup capital, and we would like to present our findings.

Myth #1 – Startups need financial projections

Financial projections are not necessary for startups.  With startups, financial projections are not indicators of variance from the past, but instead are a promise of something good but are unlikely to happen.

The only real numbers that are actually available are a few year’s worth of cost estimates.  

Consider this: most entrepreneurs, when drafting projections for startups, start with Year 5, then work backwards to show figures that build toward the end result, as observed by Seedrs.com.  

This is how it is done because there really is no way of creating a more accurate projection for startups.  

Myth # 2 – Financial projections help investors on what really matters

Financial projections for startups, in reality, are actually distracting to investors.  These numbers are irrelevant for early stage business.  When presented with such numbers, investors tend to lose sight of all the other available information and focus on these numbers.  Jeff Lynn of  Seedrs.com put it best when they said that projections take the investor’s attention away from what really is important when evaluating a startup.  Plus, it leads investors to make decisions that can be misleading.  This is a sure way to cause “buyer’s regret”, or to put it more accurately, investor’s regret.  

Myth # 3 – Financial planning is about predicting the future

They say a company is a failure if it does not meet its projections.  On the contrary, financial planning is not about foretelling what is going to happen, but a way for a company to be prepared for its unpredictability.  

I would also like to add a couple of other myths regarding raising startup funds:

Myth # 4 – Startup entrepreneurs are obligated to follow investors’ advice

There is really no obligation to follow investors’ advice, but if you are the business owner, you should do well to listen to them.  Totally ignoring their advice might not sit well with them, and it might cause your funds to soon dry up.

Myth # 5 – You will need plenty of money to start your business

You do not necessarily have to be swimming in cash to start your business.  You can get it off the ground with modest funding from a few investors.  It is possible that once you have generated income, you may find out that you do not really need as much money as you first thought.

Conclusion

This article should clear up any confusion about the myths surrounding financial projections when raising startup capital.  Are there any myths we missed?  Let us know in the comments section below.