Steve TorsoThursday, 20 October 2011 14:50
Raising Funding: When To Approach an Investor: Steve Torso
I'm being challenged in the niche my business occupies. Should I look for investors now?
I’ve started to be challenged in the niche my business occupies. Should I attempt to go to an investor for funding now or wait until I’ve seen off the threat?
Under-capitalised markets leaders are tomorrow’s relics. If you believe you have discovered a niche with deep potential, work aggressively to exploit the market potential now.
The threat of substitutes or new market entrants is always present.
Think of MySpace versus Facebook as an example. MySpace was first to market, Facebook is the market leader.
While “Who has the most capital to invest” is not a measure of market leadership, capital does provide you the ability too, attract the right talent, further develop products, develop sales channels, establish your brand in the market and build barriers to entry.
Market leadership for early stage or niche offerings can be a matter of perception.
As we have seen with companies like Spreets, which sold to Yahoo7 for $40 million within their first 12 months of operation, being perceived as market leader positions you well to be acquired in the future.
Going forward you should:
1) Start to plan for your capital raising
Raising capital can take many months and a lot of time out of your day-to-day focus on operations. Expect it to be hard work and something which you need to be 100% committed to.
You need to prepare an information memorandum, executive summary and if you have the budget a corporate video.
2) Build your board and advisor network
In all of our surveys, the number one attribute investors look at is the board and management.
For some good tips on recruiting Board Members, this is a great article featured on StartupSmart.
3) Build a list of potential investors
While you have been busily growing your business, you would no doubt have come across several people which could either provide investment, ideas or access to investor networks for your company.
Create a list of all these people and be aware that some of them could also be existing customers or suppliers to your business.
Money being raised at the moment tends to be “active” or “strategic” money. This means investors are looking for businesses which they can actively add value to, or is strategically beneficial to their own existing businesses.
Once you have created this, provide them with regular updates on the progress of your company. Like with all marketing, out of sight, out of mind.
Investors like to see progress, momentum and execution.
4) Launch your capital raising with a focus on smart money
To capture a niche with active competition circling, you need to be aggressive.
By seeking out “smart money”, you are seeking out potential investors which have 15 to 30 years of business networks and know-how in your industry. This is far more valuable than just money alone.
You want to leverage off that experience to ensure you remain the market leader and build on your position.
5) Continue to aggressively grow your business
All entrepreneurial success stories are about pushing boundaries, whether it be technology, marketing or being disruptive to an existing industry.
Utilise the capital you raise to recruit talent, expand your presence and build barriers to entry in your market place.
If you look at Boost Juice, they were unique in that they created barriers to entry via their brand.
Ensure they you remain strong on what differentiates you from your competitors and aggressively promote that to the market place.
Steve Torso is the Managing Director of Wholesale Investor which is Australia's largest private investment platform, which has showcased over $500m in private opportunities. Through a high quality magazine, CEO Interviews, live investor events and online distribution, Wholesale Investor provides investors with direct access to companies seeking to raise capital.
Share This page :
Top 5 Most Read
- Westfield wins contract for LAX retail space
- Inflation milestone: The RBA is in uncharted territory in deciding next rate movement: Christopher Joye
- Property taking longer to sell as stock levels hit record highs in some areas: RP...
- Days on market blowout: the 30 worst regional slowcoaches for unit sales: RP Data
- Days on market blowout: the 30 worst regional slowcoaches for house sales: RP Data