Alex, I’m involved with a media startup that’s at the raising capital phase. I don’t know how to go about this, so I thought I’d ask you. How do we raise money, about $250K, to get us started? Can you give me advice on how to proceed?
Alex’s Answer:
When raising capital, your mission should be to raise the entire amount needed over the period of your business plan and not only the sum needed now. Before you start looking for capital, you must already know how much capital you need to operate your business over the next three to five years. You will get this information from your plan. However, if your plan is not clear on the issue, you may need help in formulating your plan as well as raising capital. If the amount you seek is indeed 250K, then your target group will be angel investors, as the Venture Capital zone is any investment greater than a million.
While most angel investors fly solo, a lot of them are part of angel groups. These investors sometimes offer something a lot more valuable in addition to their checks. They sometimes offer their expertise and industry connections. Now, take this as the gospel, you want access to their address book, much more than you want money in the bank.
Networking is the chief element in raising any amount of capital and flourishing any business. You must pay attention to the local, national, and international business publications to know when other companies are funded and who fund them. Investments typically have “lead” investors. These investors are, obviously, exactly who you should target. Get to know them. See whom they know and if you know anyone, they know. This is the first step in developing a connection. Also, try business networking sites and professional networking events to see if you and these investors have friends or colleagues in common. If you have no connections in common with these investors and cannot establish one, then join angel networks in and around your area. This should get you started.
Now you have made a connection with an investor, is your business plan investor ready?