I am not a technical expert on investment, but I have raised the funds to start several businesses. With my most recent one, DC Power Co, we have added an extra tool to our fundraising toolbox – crowdfunding.
Crowdfunding is a great way to raise funds for a particular type of business, but I’ll talk a little more about that later. What I want to start with is your story.
Your story, the one about why you are raising funds, needs to be compelling, needs to excite the investor and needs to answer their questions. In my experience, your story starts with the project, idea or business and then is built out in two ways.
Firstly, it has to demonstrate why the team you have is made up of the right people in terms of their skills, but also their experience and ability to work together.
Secondly, it has to demonstrate why your idea stacks up financially. Remember all of those Shark Tank episodes? They start their pitch with the idea and get the sharks excited, then end talking through the numbers.
Matching funding for the business is also crucial to success and is sometimes overlooked. Often when people talk about their ideas they haven’t thought through with enough detail how much money they’ll need for the different stages of the business.
We made it clear to our investors in this stage that to be successful we would need to raise more funds in the near future. That is, if we hit our goals and were getting the right signals about the business growth and development.
It is possible at the early stages to involve a family member, close friend or associate to take an initial stake in the business if that is available to you. It can help you progress the project to a point where more people can visualise the concept and get excited to invest.
It’s also worth remembering that people are far more likely to invest, particularly if you don’t have a long track record if you have invested significant amounts of your own time and money. But don’t over value your part and undervalue the investors.
Seeking advice on what your project is worth so you can offer investors a fair share for their funds is important. If you have a great story but are finding it hard to raise funds you may just be valuing incorrectly.
Lastly, choosing the right platform to raise funds is important. I have started businesses in many ways – with my own time and money, borrowing and/or selling shares to family, searching out partners with cash, pitching to a room of friends and supporters, pulling together full investor pitches with quality data for sophisticated investors, and most recently using crowdfunding.
What’s important is to be honest with yourself about what you are raising funds for and who is likely to be interested. When you think you know the answer to this question, test it by speaking to people and see what happens.
Crowdfunding is useful because it allows you to invite hundreds or thousands of people to invest anywhere between $50 and $10,000. It is particularly useful in a couple of situations – when you have an idea that will impact a particular community of people (for us it’s people with solar panels on their roof) and when you believe that your product has mass appeal and your investors will then buy your product.
Business is a tough game. Win or lose, you’re already brave for having a go. Good luck and well done for starting the journey.
Nic Frances Gilley, Co-Founder and Chairperson, DC Power
