Unique differentiation has become the most vital part of any business plan. Now more than ever, entrepreneurs need to be able to answer three key questions:
- Who are you?
- What do you do?
- Why should I care?
The ability to effectively communicate that message and grow the infrastructure to support it comes with a high price tag. Even with the adaptation of social media, firms are spending a large part of their marketing budget to sustain it.
Therefore, a key component to any fledgling business is knowing where to look for opportunities and getting an audience with the right people. This is especially true when trying to raise money to grow and start your business.
As the economy begins to recover and stabilize new investment capital will become available; however, according to international bestselling author Wess Roberts, demand will far outweigh supply. Dr. Roberts, author of Leadership Secrets of Attila the Hun, says that less than 10% of opportunities presented can expect to be funded. “Entrepreneurs should leverage their sphere of influence to get a personal introduction to venture capitalists and other investors. They must be ready to present their opportunity in a professional manner with quality answers to any questions about their business model.” He believes that investors will focus primarily on expertise and track record in making any funding decisions.
If Roberts’ predictions hold true, we should expect an intense competition for investment dollars which will lead to even more complex fundraising efforts. “I’m not certain many businesses can afford just one round of fundraising,” says Rich Alton, CEO of Brightridge Capital which will see a nearly 40% return this year. “Profitability may take several fundraising campaigns and will come from various investors. “ Alton says that investors should set milestones between rounds of funding. “If we’re buying equity we must know why we’re buying. Otherwise, if we don’t know why we’ve bought we don’t know why we’d sell. “
Markets that typically attract venture capital may present too much risk and exposure for traditional bank loans. Even if the risk is mitigated, the dollar volume often exceeds the scale of small business loans. In turn, this has given rise to a new wave of small business investors. Many venture capital investments are high risk but offer higher-than-average returns. “We’re seeing more software, telecom, web and hardware requests this year,” says Nick Mulvaney, managing partner with qFund. “Technology businesses must grow fast and large if they want to be successful.”
“Our clients want us to find the next Google,” says Jared Lucas, a wealth management investor. “They want to know that we’re taking calculated risks and that we’re doing our homework.” Lucas believes that entrepreneurs seeking funding must present a strong case for their business. “We exist to fund good ideas. Prove to me that yours is!”