KEY POINTS:
If you are a business owner or someone with an idea that you think has potential to be a business you often need to build resources around you to make it happen.
You need your own talent, you need a team, you need cash and you need some luck. Even if you can get the momentum going on your own oxygen or your family's extra muscle, eventually if you get a flyer you will need that evasive currency called cash to fuel the company.
Either way, if you don't have cash, you need it, otherwise you will not be able to advance the business while the market opportunity is there.
In this doom and gloom world, the markets have tightened up and finding anyone who is prepared to back you with their cash is a challenge. Whether that is banks, finance companies, your parents or even these people called Angels or VCs.
However, in these tough times, there is still real money to be made.
Don't be a momentum player like the rest of the desperadoes, cast your own aspirational path and find some people who want to believe in you and work with you and your team to deliver on the entrepreneurial dream.
Critical to getting cash from anyone is building a story and convincing people to come on board. This is a sales process, it is as simple as that but there are a few tricks of the trade to make it easier for you and the investors.
Did you know that 70 per cent of all companies seeking funding in the Auckland region over the last year were not classified as 'investment ready'?
That means 7 out of 10 companies did not even get a look-in to investors or banks because they had not done their homework.
I figure that is just the rules of the game - you have to get your act together to get onto the dance floor.
My own checklist to finding investment goes like this:
1. Articulate your business strategy
2. Build your investment documentation ie business plan
3. Create the investment strategy for the funding required which is detailed in 2
4. Source a pipeline of potential investors
5. Close a deal
6. Document the deal
I deal with people every day who have never raised money before and they get spooked by it. When I explain that it is just a sales process, they start to become more comfortable.
Once you are on the dance floor, then you need to play the best game to get the best investors or lenders and you need to make sure that who you are talking to is interested in your proposition - which means you need to do some work in advance to source qualified leads for investment.
The final point I would like to make is this; money is money, just oxygen to fuel the dreams. It does not create success, it is just the lubricant.
What creates the success is smart and experienced people. So when you go about looking for a financial partner, whether that is your local bank or an angel investor or venture capitalist you need to do your due diligence on them.
What will this person bring to the business, what relevant experience will they bring, what time do they have to give to the business, what ability do they have to continue funding beyond their initial investment.
Your banking partner is a good example, they have incredible experience and networks, you just need to ask and enquire.
If all an investor brings is cash, then that is not enough when you are trying to climb a mountain which is your business dream - time and time again, it is the smart people who have been around the block who will save you and your business.
When the pressure is on, do you want a family member telling you what to do or do you want an experienced, wise, counseled business person on your side negotiating deals, doing the cash flow, helping you with your foreign exchange exposures or visiting customers with you in foreign markets.
This is a simple story about raising funding. Understand the process, be prepared and get the best investors you can to help you deliver on your dream.
* Andrew Hamilton is CEO and founder of The Icehouse, which describes itself as a business growth centre, focused on creating learning environments that help owners and managers to transform their companies.
