These days, there are too many entrepreneurs that are focused on raising capital, forgetting that it’s simply a means to an end. Instead of focusing on the funding itself, you must focus on what you can achieve with the funding.

Television shows like Shark Tank make fundraising look easy. You may believe that getting the funds for your business is as simple as going into a meeting room for 20 minutes and walking away with a check and a new partner. However, the truth is, finding funding for a business is a full-time job and often takes over your entire life.

The funding frenzy of 2021 led some entrepreneurs to believe that investors just hand over money. However, the truth is, an investor isn’t going to give you anything unless you can prove that you’re ready. If you attempt to raise funds before you are ready, the investor will rip apart your business idea and you’ll burn a bridge because you did not respect their time.

There are 3 things that you need to know before you move forward with looking for an investor.

3 Things to Know

Does your business satisfy a need?

If you try to raise funds too early, your product/service isn’t at the stage where it can afford the lack of attention it will get while you are trying to raise funds. Many times, the company will digress when the founders are occupied with other things. This cycle makes it harder for them to raise the money- which makes the founders more desperate for funding.

Therefore, you must put in the effort. You must get out there and interact with potential customers. If you show up to an investor meeting and haven’t done the research, the investors will not be impressed. They are not there to validate the market for you.

You must validate that customers have a pain point that your business will address. You should not be obsessed with your solution, but with solving the problem.

Investors often ask questions that you may not expect- but it will be obvious whether or not there are other companies that are addressing the same issue. You need to prove how your approach is different. You can’t do this without doing your research and getting to know your potential customers.

Do you have a minimum viable product?

Before you think about seeking investors, you need to put in time and effort on creating a minimum viable product. You will want to have something that works at a basic level or better to show your potential investors.

Remember the discussions with your potential customers about their pain points. You will now want to find out about what products they dream of having access to in order to address those pain points. Consider bringing them on as design partners and build the product with their needs and ideas in mind.

You can then use them as beta testers and hopefully, they will fall in love with the product and become paying users. After all, paying users is one of the best ways to show investors that you are worth the risk.

Is your plan executable?

Finally, you need to determine whether your idea will realistically provide your investors with the return they are looking for. The truth is, most start-ups fail- so the potential advantages need to be high for investors to believe it’s worth the risk.

Also, you want to make sure that you have a plan for scaling your business. Don’t use a small sample and make the assumption that you’ll be loved around the world. Even if you have customers in your area that love you and are willing to pay for your product, you need to have a plan for penetrating major markets and competing with other similar businesses.

 Never go into an investor meeting with only the desire to expand. You need to know which markets you plan to target and why- and have clear steps on how. Then, you must explain to your investors how their investment will help you reach those goals.

Are You Ready?

If you are ready to explain these 3 things to potential investors, contact TCF Capital today and we can help you get started. If you are not ready to move forward, take your time to do the work and then contact us. We will be glad to help you with getting the funding you need.