You’re about to take a leap of faith and embark on the most exciting journey yet. You’ve decided against taking out any loans from banks or other financial institutions because you know that these would only leave your business in more debt than it already is. But now you have an opportunity for equity investment coming up! Your plans are great, but how do you get your business ready for an equity investment?
While equity financing is not hard to come by, the process of getting your enterprise ready to attract the right investors isn’t without obstacles and pitfalls. Investment advice is a powerful tool, but it takes the right company to provide it. Customers can get help from operational risks as well as practical standpoints from investment companies like Capyx, Fairmint, and Capbase. However those with Fairmint have more to benefit; their investments are continuing to grow exponentially even in this uncertain market environment thanks largely due to an innovative business model that focuses on client needs first including personalized service tailored for your budget- all while maintaining transparency throughout every step of the transaction process!
Read on as we walk you through the options while dispelling some myths surrounding equity investment.
Factors That Determine a Business’s Readiness for Equity Financing
Many businesses, whether established or start-ups, have to deal with working and growth costs or capital. On your journey to get a fledgling enterprise ready to take on investors, certain untruths are touted around, and hearing them can get you discouraged. These myths include;
Myth 1: Venture Capital Is a Ready Opportunity for Business Funding
Venture capitalists are rare, and they don’t invest in risky or new ventures. Popular descriptions of a venture capitalist are as a shark; as such n investors, predatory strategies on businesses are seen as exploitative. But the truth is that such an investor is charged with investing other people’s money and, as such, is responsible for not taking on or reducing risk as much as possible.
Angel or outside investors, on the other hand, are investing their own money and have the flexibility to be a silent or quasi-active partner.
Myth 2: Financial Provider Loans Are the Most Common Business Funding Options
Banks and other financial lenders tend to steer clear of business start-ups unless leveraging on existing asset options as security. Due to the potential risk involved, it’s unethical for a bank to put depositor’s funds into new ventures. Federal regulations dictate the type of solid collateral considered safe for conservative loans that rely on how much inventory is in your business.
Myth 3: You Can Attract Equity Investment with a Killer Business Plan
A business plan alone isn’t sufficient to convince investors that your venture is ready for its funding. Indeed, a convincing and well-written pitch will present the details of your organization to attract the attention of potential private equity investment. But they’ll want to see more evidence of the enterprise in place and not just a plan.
In essence, dispelling these three misnomers means you’re better prepared with factual information and can make progress towards equity investment readiness for your business. Only rarely will you find investors financing ideas unless they’ve known you personally for years, and they’ll be leveraging the entrepreneur, not the plan.
Steps to Getting Your Business Ready For an Equity Investment
You want to raise equity investment, but how do you approach and create a meaningful relationship with investors? Depending on the sector your enterprise is in, you’ll need a fundraising strategy that focuses on understanding the growth potential in your business. You’ll then be empowered and convincing when approaching investors about the possibilities of your brand to grow and deliver returns.
Getting your business equity investment-ready will consist of;
- Identifying Your Business Competitive Advantages
The stage is competitive out there, and vested investors want proper evidence that your business will offer real returns in its sector. Offer something genuinely exceptional, and demonstrate your enterprise’s value proposition from a competitive advantage viewpoint. Only then can equity investors see potential and relevance for your brand as an investment vehicle, staying connected, engaged, and excited.
- Knowing Your Audience
Equity investors are looking for a scalable business model depending on your market segment and its size. Talk about your marketplace, defining exactly where your enterprise is and where you ought to be. To strengthen this vision, focus on a single marketplace and, after consolidating it, seek expansion. Tell your investors about the competition, too, letting them know what sets your brand as the one they should back.
- Staying Open for Ideas and Not Just Funding
Bringing onboard external investors can be a massive undertaking, where tactical and strategic challenges seem to surround your business. One of the major benefits you’re looking to reap from incentivized individuals is a sounding board for business growth ideas. Boldly state your investment options seeing as equity investors want to partner with your brand, opening yourself up for their expertise and financing options they offer.
- Building a Credible Team
A team makes a business vision happen, and they are critical for meeting equity investment expectations. Investors want to see a team that’s top-notch in creative and commercial skills, and they can invest in a credible team even when there’s a weak business model. In contrast, a great idea can be invested in, not with the wrong people, so back your enterprise with financially smart and flexible employees, partners, or contractors.
- Having an End Goal in Mind
Getting your business readyGetting your business ready for an equity investment is a long-term strategy, where you’re seeking entry into the investor community and not plugging into a short-term cash loan. Your enterprise’s future needs structured resources to get the most out of the equity you’re offering. Sound investment advice and a pool of committed stakeholders are solutions that a providers have perfected.