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Getting personal: How to secure investment in your small business | Updated: 5:16:39 PM, Thursday June 14, 2012 Getting personal: How to secure investment in your small business

You’ve got a hot business idea, a vision and a plan. Unfortunately, there’s not a lot you can do without access to some cold, hard cash.
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You’ve got a hot business idea, a vision and a plan. Unfortunately, there’s not a lot you can do without access to some cold, hard cash.

Unless exceptionally lucky, most SME owners will have to secure capital investment at some stage of their business lifecycle. However, gaining the attention of potential investors, and ensuring they trust you enough to close the deal, can often be trickier terrain.

Securing capital investment can often be a slow and frustrating process, especially for first-time entrepreneurs. Most business owners would rather spend this time developing their companies rather than listing fundraising prospects, lining up potentially fruitless pitch meetings and asking for money. Unless you can prove your record of success, securing capital investments often means contacting dozens of prospects.

Demonstrate knowledge of the market

There’s no denying that relationships are based on trust, and this is doubly important when there’s hard-earned cash involved. More often than not, this means taking a personal approach to securing investment and doing whatever it takes to convince prospects that your business is a safe bet. Demonstrating past career wins and a thorough understanding of the market you’re attempting to crack is key to securing investor interest.

“When we first rolled up the capital raising sleeves, all we had was our background in footwear and 38 pages outlining Shooii’s business model,” says Dave Prince, managing director of the e-commerce startup specialising in footwear. “Getting your first investor is always the toughest, but once we secured some investment the doors opened a little more easily.”

For Prince, proving to potential investors that he could create enough momentum to drive his business forward was essential to attracting investment.

“Investors want to see forward progression, despite young companies having the odds stacked against them.”

Persevere and take the little wins

Persistence is also an important trait for business owners looking to close a deal. He says that startups should be prepared to spend at least 50 per cent of their time on capital raising if they want to be a success.

“We took the view that most investors would say no the first time around, but rather than take offence, we kept all the contacts on a central list and provided them with a monthly update of our milestones. Highlighting little wins on the way has paid off, ultimately some prospects who initially said no have ended up investing in Shooii.”

Don’t cut corners

It’s also important for startups and early stage SMEs to expect thorough scrutiny and do everything in their power to prepare for it. This means ensuring that financial information is watertight, tidying up legal affairs, and proving a willingness to risk personal assets should the business fail. It’s vital that you prove your credibility to investors, this is the factor that’s most likely to get them over the line.

This naturally extends to being honest about your business. Although it’s common for entrepreneurs to make unrealistic financial projections, this will come back to bite you in the long run. However, it pays to remember that getting personal can work both ways.

“There’s good money and there’s bad money. Learn the difference early and don’t be afraid to walk away from an investment deal if it doesn’t feel right.”

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