4 Mistakes Entrepreneurs Make When Raising Money For Their Business And How To Avoid Them
The first time I tried to raise investment for my business, I was a hot mess. I had no idea what I was doing, what I needed to prepare or where I needed to start to find investors. It took me the best part of a year to raise my first round of funding for my first e-commerce business and included a lot of sleepless nights, closed doors and I even started to lose my hair from the stress as my business began to run out of cash. I learnt a lot from that first round. What to do and what not to do. I’ve since gone on to raise millions in investment for both my own business and other start-ups
and become an investor in my own right. I think it’s pretty safe to say I know a thing or two about funding a business and what investors are looking for.
Here are the 4 common mistakes entrepreneurs make when raising money for their business and how you can avoid them.
1. Not making a plan
All too often, entrepreneurs are raising money without really understanding what it means for
them, what investors are looking for, or how they will use the money if they get it. They lack a clear plan of action which means when it comes to speaking to investors, they feel overwhelmed and nervous.
How to avoid this:
Investors want to see that you have a clear vision of where your business is going and that you understand all of the fundamental triggers that make your business work. These are things like how much money you plan to make, what your profit is and how much it costs to acquire a customer. They also want you to have considered all of the risks to your business such as what would happen if you supplier went out of business, or a larger competitor moved in more on your market. The easiest way to collect all of this information is to create a Slide Deck which is usually around 20 slides summarising the key areas of your business.
2. Being afraid
I’ve seen this countless times working with entrepreneurs to raise funding - they are afraid of the entire prospect of raising money. Women particularly have a serious case of imposter syndrome when it comes to raising investment. They think it isn’t for them, or they question
whether their little kitchen table or creative business with a team of 4 (or even less!) is worthy of investment – when actually they are sitting on a profitable gold mine, in a huge market that is currently being underserved. They are afraid to think BIG and let this fear hold them back. The thought of having to pitch to investors or put themselves or their business out there petrifies them. Often they are most afraid of the unknown or the perception that it is like Dragon’s Den with gruelling Q&A sessions. Whilst there are a lot of suits and glass boardrooms and there are Dragon’s Den style pitching events, for the most part it’s all just people connecting with other people – and a lot of coffee
dates! Think of it this way, you can either be afraid or be rich. (Well sort of rich… you will be able to take your business to the next level with greater prospects of making yourself more money.)
How to avoid this:
“You get in life what you have the courage to ask for” - Oprah Winfrey.
If it’s good enough for Oprah, it’s good enough for us. If growing a wildly successful business is what you really want, then don’t be afraid - I think you should just go for it.
3. Not starting soon enough
Raising investment takes a long time! Anywhere between 3 months at the earliest up to 1 year, with the average fundraise taking 6 months from starting to make a plan, to money in the bank. This often shocks a lot of entrepreneurs as there is a common thought that “there are lots of
investors out there”, “there’s a lot of money in the market,” and whilst this is true, you also need to kiss a lot of frogs before you find an investor that is the right match for you. Remember you’ll likely be running your fundraising campaign alongside your day-to- day job and trust me, raising money takes up a lot of your time!
How to avoid this:
If you think you might need to raise some private funding within the next 12 months to grow your business - start the process now!
4. They haven’t invested in themselves
This is another big mistake but the solution is pretty logical when you think about it. Entrepreneurs will often come to investors looking for money when they haven’t yet invested in
their business themselves. Investors want to see that you have funded the initial start-up costs of your business to launch your Minimum Viable Proposition (MVP) to prove there is a market for what you are doing; and they also want to see that you have invested in your personal development and getting yourself and your business in shape to raise funding. They want to know that you have some skin in the game and that you are taking your business seriously. When you think about it - would you invest your own money into someone else’s business if they hasn’t invested in themselves?
How to avoid this:
Invest in yourself! Whether that is paying a graphic designer to create a professional slide deck which reflects your brand, or a coach to work with you on understanding your business
fundamentals, financials and entrepreneurial mindset.
About the author
Helena Murphy is a business coach, serial entrepreneur and
investor on a mission to help entrepreneurs raise investment, grow their businesses and demystify the funding landscape.
Helena has raised millions in private investment for both her own ventures and other entrepreneurs.