What Does It Take to Raise Money?
Tips on how to be a worthwhile investment.
By Adam Ismail
There is more money than ever before being invested in the natural products industry, but there is even more frustration from entrepreneurs that are not getting any of it. You can look at the public markets and see everybody’s stock price falling, but you can also look at improving operating margins and very high growth in certain niches, such as food ingredients. There are very different investment opinions for public and private companies. For most venture firms involved in this business to invest in a company there are a few specific criteria that go beyond the numbers in your projections that must satisfy them.
Create A Solid Business Plan
Venture capital firms want a high return on their money, so you have to be able to demonstrate in your business plan that you can deliver. The catch is that your numbers have to be believable. It is pretty easy for a company to say that a third of the U.S. population will use their products and as a result the company will be wildly successful. You probably won’t get any money with a plan like this unless you can almost prove that many people will buy your product.
Understand Your Market
Companies seeking capital need to demonstrate that they understand their target market and are able to back it up with data. After all, these demographic numbers will drive sales forecasts. This industry is constantly changing and if you don’t realize that, the investors will notice. It also never hurts to have focus group or survey results as well to prove that there is interest in your products or services from your target market. At the very least you may learn something about your market.
Seek The Science
One of the hot topics in this industry now is scientific evidence that your product or service works. Knowing that the product truly does work will make the consumer buy it. People have been saying for years that they cannot afford clinical studies, but they are finally realizing that to be successful in the long run, they need to use science-based marketing. It really is something you should consider an investment rather than a sunk cost because it will probably pay off.
Good Management Also Key
Venture capital firms also invest in good management teams. Adding a few well-respected names to your employee list makes you look all the more credible. We have learned in this industry that when times get tough, you have to have someone who can make things happen. If you do not have any of this experience, you really need to show that you are passionate about what you are doing. If you are, this usually means sacrificing a larger piece of your company than you would like in order to make the company succeed or investing a large portion of your own money in the business. Remember venture capital firms are partners, not lenders.
Build A Network
Finally, use your network of contacts in the industry. You probably know somebody who has received venture money and can at least get your business plan on the desk of a venture guy. If your contacts are successful they may even want to invest themselves. Relationships get you everywhere, so why not use them to get rich.
This is not the complete process of what it takes to get venture money, but these are important things to know that will make you appear credible and help get some capital so you can grow. The environment is always changing and your business could too. Be sure you understand what could happen if the industry entered another downturn. Good luck.
NW
