Here's a question I frequently get from young entrepreneurs: "How do I fund my new mobile startup business?" After all, you might have an excellent idea and, perhaps, a small team who would love to create a business out of the idea. But you don't have the funds to build the product and bring it to market.
Some successful serial entrepreneurs may have enough capital to do the initial funding of their next business, but even if the entrepreneur has the funds to start a new business, he or she will want to bring in other investors to share the risk and more quickly expand the business. So, even wealthy entrepreneurs have to approach other investors at some point.
Obtaining the capital from investors is a viable way to get your business off the ground, but you need to follow some guidelines if you want to successfully raise capital. Here's what you need to know.
Create a business plan
The first thing you need to do is create a business plan that outlines what the new business is going to do and how it will become successful. However, a plan by itself is not adequate to get funding. You'll need to demonstrate to your investors that the product or service you're creating solves a problem (often called the "pain point").
The first question investors typically ask is, "What problem are you solving?" Then they ask, "So, why is someone going to buy your product or service? What information do you have that demonstrates that people will at least want to use it or are willing to spend money to acquire it?"
There are five stages that entrepreneurs typically go through in order to find the necessary capital to get a new business going (generating revenue) and profitable. It's important-before you approach any investors-to define as well as possible the total capital it will take to make the business successful on an ongoing basis under normal economic conditions.
In economic downturns such as the one we're currently in, it is actually a great time to start a new business. Costs are relatively low, talent is more readily available and you can likely grow quickly via partnerships. If you have a good idea and a solid plan to make it successful, then funding will come your way.
The process where plans are presented to investors is an excellent way for the market to "weed out" those deals that don't have a solid foundation. Successful ideas with strong management always get funding. Remember that the number one thing that investors consider is the strength of the management team. An excellent idea with a weak team will never get funded. An excellent idea with a strong team will always get funded.