What is one of the biggest mistakes many entrepreneurs looking for funding make?
They don’t prepare properly before approaching a funder. Raising funds takes time and resources. You should never approach a funder until you have done your homework. Find out what each investor’s mandate is, and make sure your project suits what they are looking for. Their mandates are published on their websites and there is a specific reason for them focusing on certain areas.
If you ignore those mandates you become nothing more than a spammer. Not only will you not get funding in this way, but you damage your own credibility. We file every business plan we receive. If you keep sending the wrong pitches to us, we’ll remember you. By the time you finally send something that does suit us, we will no longer take you seriously. The tip: to be noticed, target the right funder at the right stage.
How important is it to develop a relationship with funders?
This is probably the most important thing for entrepreneurs to do. You should be developing relationships before you even need funding. The better you know you each other, the easier it will be for you to match what the investors are looking for, and for them to know you and believe in your vision. For investors, the entrepreneur or the start-up team is as important as the business idea. It helps if we know you and your business, particularly because investors spend a lot of time with the teams they invest in. The relationship is very important.
What is the single biggest thing you hear from potential investees that turns you off an investment?
When an investee says there is no competition in a market they value in the billions. It’s an immediate red flag that either they haven’t done their homework and have no idea who their competitors are, or they are completely naive about the market’s potential. You always, always need to know who your market is, who your competitors are and what your differentiator is. If you say there is no competition, you automatically avoid these key issues that investors want addressed.
What are the key attributes you’ve noticed in entrepreneurs who succeed?
Commitment to the cause. No matter whether they receive funding or not, they find a way to make their business work. You’ll never hear a successful entrepreneur say ‘I would have made it big, but I couldn’t receive funding.’ They make things happen. In fact, their concept is usually a reality before they even raise funding. They’re resourceful and opportunistic. Money is not an obstacle, it’s merely a problem that needs solving.
They also tend to have domain experience. They’re not trying to enter a market they know nothing about, but have worked in that industry and have strong contacts. And finally, it’s all fine and well having domain experience and an excellent business plan, but you need to be able to communicate your vision. Really successful entrepreneurs don’t only have a vision, but they get everyone else to buy into that
In your opinion, why do most entrepreneurs not get funding?
They haven’t done their homework. They haven’t put enough time and effort into really working on the business and researching their market. Through research they will be able to prove their differentiator, establish a competitive advantage, develop a strong, revenue producing business model and evaluate their market. Investors will know when you haven’t done enough research and work on your business model.