How to raise capital for your business (1)

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We will take a quick look at capital, because this is usually the first and last question I get asked almost every time. How Do I Raise Capital? And I am sure most of us here as we go further into the year will be asking the same question. I want to do this or that but how do I raise money?

When we talk capital, the first thing you need to understand is that nobody owes you money. If you like nag. If you like complain. If you like get angry at anybody because they did not give you money. If you like use the pity trick and try to elicit pity. nobody owes you money. You must go out there to earn it by selling your idea. So, when it comes to raising capital, have this at the back of your mind.

Next you need to quit being afraid of failure because 95% of your proposals for money (raise capital) will be rejected. When this happens, you need to learn from the rejection, pick yourself up and re-try

With that said, there are about 4 stages either in business or investing where you may need capital

1. Pre-start stage: The pre-start stage is the idea stage before you have taken your idea to the market for instance. You may for instance need capital to build a prototype.

2. In-motion stage: The in-motion stage is when you have gone to the market and you are in the process of sales.

3. Expansion stage: The expansion stage is where growth stalls and you need an infusion of capital to jump-start or expand.

4. Grounding stage: While the grounding stage is that point where you have a large customer base, you are solidifying your business process, creating a great team etc and you are generally making the business or investment in such a way that it is built to last

It is very important to know at which point of these 4 you are in and it is quite amazing how many people try to raise funds without even first doing this simple analysis. As we go on, you will see why it is important.

Now, that out of the way. Please understand that money is NOT the only capital

This is another very serious error people make when it comes to capital. They think in terms of money alone and this is wrong.

Here are 7 types of capital you should know about

1. Human – You. Dead men don’t need capital. Sick people generally don’t start businesses. Which makes you the No. 1 capital, as far as I am concerned, you are more important than money and you are the 1st capital. Simple, you can make any idea, business or investment work because you are the principal, take YOU out of it and everything falls apart at the speed of a sneeze.

2. Idea: When it comes to capital (money now), there are 4 classes of people

  • People with ideas but no money
  • People with money but no idea
  • People with both
  • People without both

The truth is that no capital can be raised without a solid idea backing it and let me tell you, some people are making a living just coming up with ideas and selling it. We will come to that shortly

3. Relationships: Perhaps the greatest capital you have is relationships. Unfortunately, we do not use this to capacity. For instance, the fact that you can just send me a message and pick my brains is a sort of capital for you. The fact that I can also send you a message and get something from you is capital for me.

4. Experience: It is so easy to go from experience to cash if you know what to do and how to do it for instance. Yet, we allow our experience (good or bad) to go to waste and yet we complain of a lack of capital. If you want to know the power of experience, here it is in a simple example.

When you walk into a doctor’s office and lay a complaint, he/she listens to you and then tells you what to do after listening and gives you a bill. That is experience and it is one of the greatest forms of capital.

5. Goodwill

6. Money

7. Material capital: Everybody, no matter how much you think you don’t have, have material capital. You cell phone is capital if you know how to use it. I do huge business on my cell phone for instance. Your clothes, the chair in your house, your standing fan, your laptop, plots of land, your car, Unused bottles, old newspapers, etc all these are capital!

So, while money is capital. Money is not the only type of capital and before you ever ask for money or go out seeking to raise capital, here are some questions you should ask yourself:

Raise Capital

1. Should I even raise money? Sounds like a stupid question but you should ask yourself this question. You see, in my experience, one of the quickest ways to kills your idea and business is to have too much money to start with. So, ask yourself. Do you really need the amount of money you want to raise?

2. If you tried to get the money and failed… can you make the idea work and how? Brainstorm, very important.

3. How will you use the money? Not just think about it but get your notes and create a detailed plan. I have seen too many people raise money and then they ended up wasting it simply because they did not make a detailed plan.

4. Do you want to go big and loose control, or do you want full control? As you will see, there are some ways of raising money that will eventually mean you will lose control over what you are trying to build.

5. Are you ready to be accountable? If you are raising capital, you will need to be accountable all the way.

6. Have you done enough research. This is another one. I see this all the time. People come with so called brilliant idea then 2minutes after they leave, I go to Google, do a 6minutes research and I see like 50 examples of the one of a kind idea.

7. What makes your idea unique? This is what investors will look out for

8. Have you ran your figures? The math is very important. If you are sloppy about it, forget it, nobody will give you money or raise capital for you

9. Are you building to sell or building to keep etc.

These are so many questions you need to ask…

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