Venture Capital and Investing in Business Start-Ups

Business Start Up Funding Silver Bullet

Business Start Up Funding

Startup companies often get frustrated when they can’t find investors willing to fund their new idea. What they don’t realize is that in order to get an investment, they need more than just a good idea and the promise of future profits. What investors are looking for is a “silver bullet” in the business that ensures their small investment will yield a huge return.

Business Start Up Funding - You Need a Silver Bullet

The silver bullet is the aspect of your business plan that proves your company can grow quickly. For example, perhaps you’ve proven that 100 customers are willing to pay $99 for your newly developed product. If all you need is additional cash to build 1,000 more items to sell more at that price, you’ve got a silver bullet.

Investors are compelled to make investments in startup companies that have proven some aspect of their business model “works” and that what they really need is more capital to make it work better, or to sell more products.

Many entrepreneurs, on the other hand, wander around in search of business start up funding to find the silver bullet in their business plan and that’s a less attractive proposition. In this case you’re asking an investor to put money into a treasure hunt, and not into a business. Until you demonstrate you can sell something (at a profit), you don’t have a business worthy of investment. Therefore you need to re-focus your efforts on finding your silver bullet.

Investors Love Paying Customers

Every business model is different, and as a consequence the silver bullet of one business may look somewhat different than another. The common thread, however, is that each of them show your investors you have found a facet of your business that works well and simply needs business start up funding to be exploited.

A great place to start is with paying customers. Even a few customers create proof that that there is an active buying market for your product that could be even bigger if you had the capital to reach more of them.

Notice that here you’re not telling an investor, “if we build it they (customers) will come”. What you want to say here is “we built it, and they already came”. This puts you in a much stronger position to suggest that if you are capable of repeating the process provided you have more business start up funding.

Understanding Conversion Works, Too

Maybe you don’t have a 10,000 paying customers but have found, on a more modest scale, that for every $1 you spend in marketing you can earn $2 back. This information is a silver bullet too. In this case you’ve proven that you understand how to acquire a customer for less than they are spending, which is a big deal.

This may seem like an obvious necessity for any successful business (let alone one looking for business start up funding), but there are plenty of companies that overlook this point. If you haven’t proven that you can profitably acquire a customer, perhaps this is a good place to start.

Analyze the costs involved in acquiring your first batch of customers and try to project this cost out to the next round of new customers and the round after that. Try for those next customers and see if your results match up with your predictions. Once you feel comfortable that you understand your cost to acquire customers you can begin identifying specific capital needs to accelerate that process.

Speed Things Up

Speeding up time can also be good reason to ask for business start up funding. If you find that it takes you two months to service a customer now, but with additional capital you could service a customer in two weeks (and therefore earn revenue in a shorter time) you’ve found another silver bullet.

Investors are always hungry for businesses that could be even more profitably or grow faster if just a little more capital was applied. Creating a strong case for this use of capital will make it easy for investors to understand your needs.

Read, Aim, Fire!

Perhaps you only have one of these silver bullets ready to present to investors. That’s fine, as long as you have prepared a strong argument for why this one single factor will have such a great influence in your growth.

Presenting your case to investors isn’t about coming up with as many reasons for investment as possible. It’s not about quantity, it’s about quality. What you want to demonstrate is that you have key factors in your business that have a demonstrated track record for growth, but need capital to accelerate that growth.

If you’re in the process of raising business start up funding right now, step back and take a second look at your PowerPoint presentation. Does it clearly articulate the fact that you know how this investment is going to ramp up the value of your startup? If not, try taking another pass with the focus on finding your silver bullet. That’s the type of ammunition your investors are really looking for.

Wil Schroter is the Founder and CEO of the Go BIG Network, the largest network of startup companies and entrepreneurs. He is also the author of the new book “Go BIG or Go HOME”, download it for FREE at www.gobignetwork.com.

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