Monika Juneja, director at One Hit Consulting shares her top tips for raising investment, having seen countless number of businesses go down this route
Every day we encounter start-ups seeking to raise funds for their businesses.
Those that are successful are applauded by friends and family for raising hundreds of thousands, and sometimes millions, of pounds worth of investment. When the cheque is written, the entrepreneurs on the receiving end feel a sense of accomplishment and achievement. This is wrong.
We are being sold a narrative that celebrates raising funds for a business, as opposed to actually building a business. Start-up founders are merely being used as investment vehicles by wealthy investors and VCs – and this could lead to a major economic collapse.
Due to films such as The Social Network and the mirage of Silicon Valley, entrepreneurs are giving away vast amounts of their business in return for investment that simply isn’t needed.
I can recall stories of entrepreneurs receiving million pound investments and instead of spending that capital on staff, infrastructure and R&D, they blew the investment on plush central London offices, thousand pound coffee machines and designer bean bags.
The underlying cause of this investment environment is likely the major sense of FOMO (fear of missing out) that has been instilled in wealthy angel investors and VC funds. A shift in power has put start-up entrepreneurs in the driving seat, sparking bidding wars between investors hoping to get a slice of “the next Uber or Airbnb”.
Here are my three rules to live and die by, when it comes to getting the most from a funding round:
1. Figure out how much investment you need and don’t give away more than you have to
Do things the old fashioned way and bootstrap your business. When writing your case for investment, ask yourself whether your requirements are wanted or needed. If you don’t need to kit out your office’s toilet doors with face recognition scanners, then don’t give away a percentage of your business for it. If you have absolute faith in your business succeeding in the long-term then every single share is valuable.
2. Take less cash if it is in exchange for expertise
If you have a choice between £100k for your start-up from an angel investor that has zero expertise in the sector you operate in, or £70k from an industry specialist – take the £70k each time. Having experts on your team can help you actually build your business as opposed to just raising funds for it. The £30k shortfall can easily be made up by organic growth and will provide long-term value way beyond the short-term gains of immediate capital.
3. Prove your market before asking for investment
In other words, start building a business. Funding for concepts is rare, so raise seed funding through actually selling your product. It’s not going to be easy, but it will demonstrate resilience to investors further down the line and it could prove that you don’t need investment in the first place!