Financing Your Business
There Are New Ways to Get Capital, You Just Have To Find The Right Pitch
This article originally appeared on Vox.com.
Business owners in greater numbers are conducting financial transactions online, or on mobile devices, and reaping benefits from leaps in technology. These changes have also allowed entrepreneurs to discover alternative ways of accessing capital to fuel growth—if they can pitch themselves the right way.
"Technology has allowed business owners to look seriously at new avenues of funding," says Brian Bourgerie, a consultant at CrowdEngine. "And so they need to think differently of how their business appears, and to remind themselves that an investment only happens when an investor is made to feel passionate about the product or service."
Henry Schwartz, who crowdfunded the expansion of his MobCraft microbrewery, says the best advice he got to help raise money was to remain authentic.
"Be confident in your story and really know it," he says. "Investors can tell if you're just making stuff up, so you need to do the due diligence on your company."
That's what Scott Baxter did. He was working a full time job as a tennis instructor and working on his business, PlayYourCourt, at night and on weekends, frequently falling asleep at his keyboard. Draining his savings to meet costs, and knowing the only way to scale the business into a full time endeavor was to raise capital, he chose to seek investors online.
"I looked at our past data and put together a business plan that outlined every spend I thought necessary to take the business to the next level," says Baxter, whose business helps customers find a personalized tennis instructor. "That included technology, employees, marketing budget and PR, among other things."
"I printed out several copies and always kept one on hand in case an opportunity arose."
He leveraged his network for introductions and participated in local events.
"You have to be patient when you're going this route," he says. "Finding the right investor or the right group is a process. It took me nearly seven months of pitching before I randomly ran into one of our now investors at a local charity event."
Making the Perfect Investor Match
Like Baxter, when Andrew Yakub, owner of Rayton Solar, began to seek capital, he leveraged his network.
"For us, going through my personal network, it was always 'Oh, I know a guy who knows a guy that is wealthy and might want to invest,'" he says. “That was the wrong approach. Your investors need to not only be actively investing, but doing so in your industry. If they don't already understand your industry when you walk into a pitch, then you've already lost the battle."
Instead, Yakub chose an online platform that would put him in front of relevant investors.
"We needed to appeal to a serious investor," he says, adding that he spent $10,000 on a high-production video for his website. "So we tested our pitch deck on five investors in real life and refined it over six months before going online."
Of course, not every business owner has six months to wait for access to capital. Two years ago, Rachel Bollin, owner of B&N Laundry, a manufacturer of organic laundry products, applied for an SBA loan and waited eight months until it was approved.
"And it was for a tiny amount of money," she says. "That got me to a couple of trade shows, and some equipment, but it didn't get me near where I wanted my company to be."
Like all business owners, Bollin is busy. So, the time she spent compiling data for the loan—the average business owner spends 24 hours on this task, according that same Federal Reserve Banks report—seemed to yield a diminishing return. She decided to try an online lender, an increasingly popular option for businesses to get access to capital quickly. Bollin's loan was approved in less than a day. The lender she chose automatically takes a small amount of money out of her bank account daily to pay back the loan, a set-up she says works well for her.
"For me it's good, because like most business owners I don't have a designated CFO or a bookkeeper that's writing checks for every payment. Because they just take money out of my account every day, it's something I don't have to think about," she said.
For many lenders, including online ones — the Federal Reserve Banks study said 38 percent of businesses in its survey had received at least some of their funding online — algorithms that quickly analyze data about a prospective client can greatly speed the process of reviewing and approving loans.
"Just as fast as new tech comes on to the market, so do the creative ways that we can access funding," says Schwartz. "We're keeping an eye on how other companies raise money here and abroad and how these new ideas work."
Brian O'Connor is an editor and writer in New York who writes about business and brands.