Every business reaches a critical moment – a tipping point – where it needs extra investment in order to take the next step. I’ve been there myself, many times, both as an entrepreneur and a potential investor – and so I’ve seen how important it is to get this right. So, what are my tips for finding investors for your start-up?
The innovative approach
Initial Coin Offerings (ICOs) were huge last year, and despite some negative pressure from several national governments (not least China’s), they still remain – I think – a great way for a new start-up to raise some much needed capital. If you’re not familiar with how they work, here’s a quick primer. They’re essentially the process by which you issue a new digital token in exchange for a crypto currency such as Bitcoin or Ethereum.
You’ll need to start out by registering your tokens on an exchange such as GDAX or Coinbase, and you’ll then issue your new tokens to investors in exchange for the crypto currency of your choice. In theory, it’s a win-win – your new business will have some fresh capital (in the form of the crypto currencies your investors have paid for your tokens in) and your investors will make money on the tokens they’ve bought from you – assuming that the value of your business goes up. A quick example is the Kik Messenger app’s ICO last year – the team behind the video messaging app wanted to raise funds, so they launched an ICO that raised an impressive $98 million.
Of course, there are a few reasons why you might want to steer clear of the ICO option – it’s a relatively new phenomenon (as are any of the new mechanisms being built around crypto currencies), and many fear that it’s a process that is too open to corruption and attacks from hackers. This currently unregulated way of raising funds is also in the firing line for many regulators, who look like they’re going to get increasingly tough on it as a way of generating capital.
Get the support of an accelerator
So, if you’re a bit wary of the ICO option, then you could consider the accelerator option as a way of raising funds. As someone who has started many businesses over the years, I know just how hard it can be to do it on your own – being an entrepreneur can be a lonely business sometimes. Accelerators show you that it doesn’t have to be, however – they’re designed to offer your fledgling business many things, but essentially, you’re going to get some much needed advice, strategic direction and yes, perhaps even some financial backing.
Being a part of an accelerator programme is generally a short-term commitment – usually a few months at most – but the people you meet and the support you’ll get could transform your business spectacularly. You’ll get access to training as well as the chance to share tips with other entrepreneurs and even meet some potential investors. I’m a big fan of the accelerator model, and I think it can be just the support you need at a critical point in the life of your new business.
Know what you really want, before you ask
One last thought. I think one of the biggest lessons that I’ve learned over the years, in starting and running your own companies, is simply to know what you really want your business to achieve. It sounds basic, but it’s hugely important, particularly if you’re getting to the point where you think you might want to start talking to potential investors. Why? Because it’s the key to knowing the right investor when you meet them – they need to understand what you want to achieve, and you’ve got to be able to identify if they are the right person to bring on board to help you get there.
So, I’ve found that before you even get to the numbers, you need to know what you want to build with the funds you’re after. Once you know that, work back to identify how much you’ll need to do that. Then, and only then, should you try to go out and find people who might help you to raise that money.