Let’s say you’ve launched a digital wedding-invite business, and $250,000 in investment capital would accelerate product development and customer acquisition.
If you think you’re ready to raise capital, here are three questions to ask yourself:
- Do you want to take out a loan (i.e. go into debt), or sell a piece of your corporation (i.e. equity financing)?
- Can you articulate, based on concrete data, the true financial market opportunity of your company, relative to existing comparables in this space? “Comparables” are similar businesses with publicly available financial data due to financing, acquisition, or IPO. Potential investors will require this due diligence.
In the case of digital invitations, comparables might include Paperless Post and Evite. How many users do they have? What other numbers can you find that indicate the size of their business? How would your business compare?
- If you’re raising capital, find someone who has raised similar levels of money in your space to mentor you. “Without my mentors and my network, I would never have been able to land meetings with some of the biggest investors in Silicon Valley,“ says Tracy Osborn, founder of WeddingLovely. Remember that active mentors will typically charge a fee or require equity in your business.