Why Raising Capital is Difficult
Raising capital today is a difficult endeavor, but why is that? According to CFO.com, US Venture Capital deal value fell by 31% last year (2022). As inflation takes its toll and markets shift, venture capital investors are more cautious about financing new deals. On top of this current trend, there are a couple of pitfalls you may run into that will hurt your chances of raising capital for your business:
- Unfocused Business Plan: If your business plan is not clear, concise, and actionable, you will have a harder time convincing venture capital investor to fund your business. With current market trends, investors do not risk their capital on a plan that may not be realistic.
- Lack of Market Knowledge: Without thoroughly studying the market and its current trends, you may be unable to identify the target market or potential for growth. Investors want to invest their capital in businesses that have clear capabilities of growth and ROI (Return on Investment).
Tips and Tricks for Raising Capital
Despite the difficulty of raising capital in today’s tough market, there are steps you can take to improve your chances. Below are some tips and tricks to help you raise the capital you need:
- Create a Focused Business Plan: Present a clear, concise, and actionable business plan to venture capital investors. This plan should include your goals, target market, financial projections, and what makes you different than your competitors.
- Thoroughly Research the Market: Research the market you will be entering thoroughly. You must be able to identify the target audience for your product or service. You should also be able to clearly communicate that gaps your product or service will bridge in the market as well as the market’s potential for growth.
- Tailor Your Messaging: You should understand the priorities of both your target audience and your potential investors. Leverage these priorities in your messaging to address how your product or service works toward these priorities.
- Be Realistic: You must be prepared to negotiate and compromise with venture capital investors. You may not receive the financing or rates you initially hoped for. Work with the potential investors to reach a middle ground that both parties can agree to.
- Improve Your Credit Score: A good credit score will help you receive more financing at a better rate, as this communicates to investors that you can pay back the money you have borrowed. If your credit score is less than ideal, take steps to improve your company’s credit score by making your payments on time, keeping your accrued balances low, and limiting the number of new credit applications you are filling out.
A Trusted Partner for Raising Capital
Raising capital in today’s market may be more difficult, but it is possible. Working with a trusted partner can make it easier for your business to raise the capital it needs. NOW CFO can help your business in this endeavor. With us, you can leverage our connections with investment banks, private equity groups, and venture capital firms. Contact NOW CFO for a free consultation.
