Let’s say you’ve got a nifty idea for a startup and you’re on the prowl for investors.
There are several pitfalls to navigate, and a few tricks to try.
Charlotte business owners gave entrepreneurs the lowdown last Thursday at the Business Innovation & Growth Council’s funding startups event at UNC Charlotte’s Center City Campus. Here’s some of what they said:
Narrow your investors: Figure out what kind of investor is appropriate for the company you’re trying to start, said Richard Brasser, CEO of rFactr, which creates products letting companies share content on social platforms.
When he first started his business, Brasser said he spent a lot of time “barking up the wrong tree” – i.e. flagging down angel investors with high net-worth instead of actual tech investors.
“Know your product and know who you’re pitching to,” said David Himebaugh, CEO of nanotechnology company Blue Nano.
You might have to narrow your field of candidates, but pitching to industry rather than to the investor with the deepest pockets might result in a better quality investment, Brasser said.
Be choosy: Bad investors are out there and you should safeguard your business against them. The kinds of investors you shouldn’t seek, Brasser said:• Someone who is “highly nervous” about making the investment;
• Someone who doesn’t understand your vision;
• Someone who disagrees with your funding plan.
Obsess over the product, not the cash: Angel investor Mark McDowell, who co-founded Washington, D.C.-based Acta Wireless, said he’s leery of startups “always raising capital.”
He’d rather hear pitches from entrepreneurs obsessed with their venture – not just the money they need for it, he said.
Individual Angel investor is a high net worth individual who invests but not as their profession. #CLTfunding— Connie Harryman (@CreativeConnie) January 29, 2015
Consider the alternatives: Maybe you don’t want to go the traditional investor route. Some alternative ways to raise capital include:• Finding free help: Becky Loranger, president of Lakeside Project Solutions in Lincoln County, rarely paid full price for classes about finding capital. When she wanted to take a class with an exorbitant cost, she’d tell the organizers the reasons she should take the class without paying. She once wrote a paper to prove her point.
• Building a reputation: Charlotte-based Boxman Studios CEO David Campbell said many of his customers are willing to pay deposits for projects upfront because his company has a proven reputation for solving their problems.
• Bonding with employees: Good employees make for a good business. Derek Wang of Taste Analytics in Charlotte said taking interest in his employees outside of work helps keep them loyal to his startup.