4 Ways to Generate Investor Interest, Even When Funds Are Scarce

Raising capital has always been a delicate situation for innovative entrepreneurs, but having the sand of a global pandemic thrown into the gears really brought things to a halt.

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The flow of money immediately froze up, and startup leaders — particularly aspiring businesswomen of color — felt (and still feel) the chill deeply.

Granted, funding can be a blessing and a curse. I've done deals and then desperately wished I could give the money back. The investor wanted to make a quick buck and constantly pushed us to make decisions that were bad for the business in the long term. Pandemic or not, it's vital that startups avoid taking the wrong money or partnering with the wrong people as it can cause far more harm than good.

Certain challenges tend to arise repeatedly when entrepreneurs and startup leaders begin raising capital. Common snags include timing, relationship quality and vigilance.  Timing is likely the biggest challenge for raising capital in a startup. Many external macroeconomic factors dictate access to capital. During a recession (or aversion to certain industries), investments can be hard to come by, even for the best teams with rock-solid pitches. Many startups with excellent ideas likely lost their chance in 2020 due to the global health crisis. Many investors, VCs and angels wanted to pause their investments for several months until things calmed down; if startups could not weather this period, they often failed. Having enough runway in your budget to survive downturns can make or break most startups. Many startups have failed that would have survived if they could have just lasted six months longer.

Another challenge is having sufficient quality and breadth of relationships to find the right investment partner who shares the long-term vision for your business. Ideally, they should be interested in how they fit into your Series B, Series C and so forth at the time they invest into your seed or Series A rounds — and not just looking to be involved in only one stage of the company's growth. To find this type of investor, a founder needs to maintain relationships with a group of potential investors that is both broad in reach and targeted in alignment with the business. Too many seek VC funds too early; those should be reserved for growth-stage startups. For early stage startups, you need to cultivate relationships with angel investors, or even friends and family.

Source: Entrepreneur Europe

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