Learning from my mistakes: Avoid these mistakes when you seek business capital
How do I find investors for my business? It’s a question in every founder’s head when they start to seek business capital.
But the process to find an investor isn’t an easy one. Even if you’re willing to put in the work to seek business capital, you first need to carefully consider whether you need it or not. Because funding comes with strings.
Are you in it for the long haul? Because initial ideas usually change over time. If you really believe in the idea, I’d first start off by talking to people about that idea for a bit of feedback. Talk to at least 25 relevant people and see if they experience the very problem that you’re trying to solve. And don't be afraid to ask if they’re willing to pay for the solution. That’s how you can actually identify if you have a market for the problem you’re solving. This helps you kick off any initial discussions to find an investor.
Because, if your idea is going to solve something important for that potential customer, they’ll be willing to talk to you and then pay for it. This will prove your product or service has a market.
When we started ServiceForm, I went on Google and searched for angel investors for SaaS startups. I reached out to many angel investors and was able to secure funding through both Leap and Gorilla Capital.
Later on, I raised €2.2 million to start global expansion efforts for Serviceform through BackingMinds, a Swedish venture capital fund. How did I do it? What did I learn from my journey to find investors for my business? Here’s a summary:
Identify what your business model is and find your target market.
Choose wisely: Choosing an investor is like choosing a partner.
Before seeking business capital, update all your online profiles.
Start selling through outbound sales efforts – immediately!
What should you do before you seek business capital?
Identify your business model and ask yourself: Do I need to find investors for my business?
Let me emphasise again that funding comes with strings, such as a long-term commitment and strict targets that you must meet. If you haven’t started your business but have a great idea, think about why you need the funding. If you want to seek business capital to execute your idea and get your company off the ground, my advice is to think twice before you leap.
Instead, maybe what you need is a small amount of (the right) money from friends and family to support building the product or service you’ve envisioned. But this first step depends on your business model.
If you’re looking to find an investor for a people-based service business, you should prove your business model and that there’s a market for it, before seeking business capital.
Whereas if you are looking for capital to do research and development of your product and you’ve already identified a market who’s willing to pay for your product when you launch, then you can go ahead and seek business capital, as you’ll need funding to develop even a viable prototype.
Find an investor who’s right for your project and choose wisely
If you're working on a small project and only need £50K, asking friends and relatives for money is fine. But involving people you know for larger projects can be tricky. If you’re working on a larger project, an important thing to keep in mind is that you shouldn’t muddy your investor pool by reaching out to every single investor you find.
Here’s what you need to do in only a few steps: identify what industry you’re in, for example, B2B SaaS. Then go to Google and search for ‘B2B SaaS angel investors’ and identify investors in your industry. Create a simple pitch deck, and then ask for meetings. Send cold emails with 3-5 selling points to these potential investors.
For example: write emails with a convincing subject line – like, “B2B SaaS Lead Generation Software with 30 ready-to-go contracts looking for advice”. Chat one-on-one and get feedback. You’ll get rejected, but it’s part of the journey. Remember, most angel investors are actually quite ‘poor rich’. Meaning even though they’re rich, they are not rich enough to invest millions of pounds. Go to as many meetings as you can alongside investors in your industry and, again, choose wisely.
Once you partner, like any relationship, you’ll need to work with them for the long haul.
Must-avoid mistakes when you seek business capital
Make sure you’ve built up your profile before you seek business capital
Before you answer the question of ‘how to find investors for my business?’, you need to ask ‘how do I build up my online profile’. This is a small but important step that a lot of entrepreneurs overlook.
They’re investing in you as a person just as much as your idea. This is why ‘you’ as a person should be just as intriguing as your idea! Make sure your LinkedIn profile is professional, for starters, and that your general online presence is visible.
Go to as many meetings as you possibly can. Even if you have a feeling that it won’t work out, go into the meeting fully prepared. Because the more meetings you do, the more you’ll learn. And make sure you’re not just ‘presenting’ your idea, network too.
Pro tip: When you jump into a meeting, don’t start presenting from your pitch deck straight away. Have a conversation with the investor and ask them what they’d like to know about your company. Then watch their reactions when you share your ideas.
Remember, you're just at the start of your journey and you haven’t figured out everything yet. Be confident in your goal and what you're trying to accomplish. If they ask you questions you don't know the answers to, tell them you don't know but it’s something you are working hard to figure out.
Start selling immediately after you find an investor
This is a big mistake I made when looking to find investors for my business and I want you to avoid at all costs. When we started Serviceform, we built our product for a year and a half before selling to enough customers, which I now realise was a waste of time and money. We could’ve saved both the time and effort of building unnecessary features that few people needed.
Thousands of companies die by building something nobody wants to buy. After you find an investor, the first thing any business needs to do is prove their business model. Focus early on building a (simple) first version of your product or service. Then start selling to your target market through outbound efforts and sales-focused landing pages.
How do you do outbound sales? Like this: identify potential customers and make a list, then try to get through to the most relevant person in your target company using multiple channels. Call them, send an email, or shoot them a LinkedIn request.
If your business has already proven its model, the only reason you’ll seek business capital is to grow. Usually your investors will be looking for a minimum return of at least 5-10 times. So be careful about raising money as it limits your exit options in the long term. My advice: if you can see that with $1-2 million you can increase your valuation by at least 3-5 times, in most cases it’s worth it! But always remember you’ll be locked in for at least 3-5 years. Plan accordingly!
With both smart thinking and caution, good luck on your quest to find an investor!
The last thing I have to say is to be cautious and think twice before you leap. Even though money helps, securing funding may not be the best thing for your business at the moment.
Carefully consider your options and understand your business model. After that, start the quest to find an investor. In seeking business capital, don’t be afraid of rejection. Because I can guarantee you’ll get rejected at some point.
Keep pushing, and never lose determination. Because an investor won’t invest in your business if they don’t see you have guts or are inspired by you as a person. I hope I was able to be of some help. Good luck and I hope to see your business on the global stage one day soon!
