Here is the 3rd and concluding part of the How to raise capital for your business series. Powered by the Hulk Business School
- Angel Investors
There are 2 kinds of Angel Investors, Warm and Cold. But before I explain angel investing, let me take time to explain what angel investing is.
Angel investing is all about you wanting to do something (a business, an investment etc) and then someone who has the money, comes in, puts down the money and you execute. Again, you are doing the hard work you are responsible.
Now, there are two kinds of angel investors.
Warm vs Cold
People you know or you have a relationship with are the warm ones. Friends. Friends of friends. Family etc. So, you get an idea, then you share with an uncle that you need N500k and he is like oh… that looks brilliant, take N250k
When it comes to raising funds like this, here is how to get it to work:
- Establish integrity before hand
No uncle will give you money if you have not been faithful in the past. An uncle who can give you N250k is a man who understands human behaviour and money. The last time you had a dealing with him, did you send a report? Did you share the receipt? Did you return a balance? That time you borrowed N15k, did you return it?
People who have funds and who get funds, have a way of keeping track of little things with which bigger intents are deduced.
- Be hardworking
People watch you. You may not know. Little signs of sloppiness, little behaviour you are not paying attention to, little comments. All these things may eventually work against you when you need funds. And most especially in the area of warm angel investors. Raising money from friends and family can something be more complex than cold angel investors.
- Don’t ask for something beyond your capacity
Hard to explain but it is like this… Everyone in your family knows that the biggest business you have ever done is N200k. The last time, N500k was committed to you, pepper soup wrecked it. Now you are asking for N1m, you won’t get it. Everyone will act nice in your presence but will ‘yimu’ when you walk out the door
- Have a solid business plan and figures
I am a Christian, yet one of the things I hate most is people coming to me with sketchy plans backed with faith! And that is what we do when we try to raise funds.
- Break down your figures: N1m is N50k from 20 people; N100k from 10people; so instead of asking for N1m, ask for N200k
Cold angel investors are people who you don’t know
For instance, you can ask your friends if they know anyone who can finance a project and you may just be shocked to discover someone who’d be interested. Of course, you must be prepared to let go of a part of the business.
- Venture Capital
This is for big boys. When you hear that someone got funding of $15m, $20m, you are talking VCs. These guys are sophisticated and some of them won’t even deal when you can’t do it big. It must be big and usually they want returns in 5-7years, and they are looking for 10x returns.
They want a coachable CEO, they want to see business structure, they want to see a team in place, they want to see a great product or service… etc
- Sell your idea
For most of us, 7 is one of the greatest options. Less risky and fastest approach for raising capital and I will attempt to do a summary, but first, How Do you find all these kinds of people I have described earlier? 6 ways…
- Your mentors and advisers
- Your friends and family
- Get angel lists online
- FDI (Foreign Direct Investments) If you can go outside the country, talk to people and companies especially at trade fairs. Partner and bring them in.
- Universities. You will be amazed at what you can get from our universities even though we bad mouth them
- Social media (open your eyes)
That said, how do you sell ideas to raise capital?
Let’s assume you want to start a vegetable oil vending station, or you want to start a vegetable oil refinery, but you lack funds. However, you have all the knowledge and experience and expertise. What you can do is to for instance place an advert that states simply: “How to start a mini vegetable oil refinery anywhere in Nigeria & make XYZ…”
If it will take about N5m set it up, then it is safe to sell that idea for like N50k or N65k or N100k, and with 50 clients served, you have the take-off funds to setup yours
There is a CAVEAT however… If your idea is so valuable and so easy to duplicate, you may sell only a pseudo idea (something related or in a related field) while keeping your main idea for personal execution.
As I close, please note. Some people make a living off selling ideas and they pump in cash by the millions, so don’t think for a second that this is impossible.
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