Getting capital may not be very difficult but getting the finance at the right time and in the right terms is what matters for some of the startups. It is extremely rare for a borrower/startup to go through the capital raising process without encountering hurdles and obstacles. Some of the hurdles and obstacles the borrower will learn on the go while other hurdles will learn the hard way. It is important to identify the hurdles and understand why they happened and ensure that they won’t happen again in the future. This post discusses some of the common mistakes that businesses (startups) make that can effectively prevent a successful capital raising.
No exit strategy
One of the common mistakes that many small or medium business ventures is to be overly concerned with how the product is going to make finance and less about how that finance is going to make it way back to the investor. The exit strategy is going to be a main influence on how much and who is going to invest in their project.
Borrowers or start up business ventures should not make a mistake of trying to raise capital before they should. It is considered to be one of the most common mistakes that almost every business venture make. Before the borrower could approach any one for rising of capital, it is important that his project or business has to be ready for planning, launching and execution. Borrower should make sure that their documents, reports and other paperwork are finalized before he applies for the capital financing solutions.
This can effectively means that a business should be ready with a proper plan, financial report, marketing report and information memorandum.
Businesses should always try to cut their cost, in order to lower the burden of raising capital. As per some of the financial experts, borrowers should not do everything on the cost. In order to get the loans as soon as possible, it is important to convey a message of quality and a vision of authenticity in the projects of the borrowers.
Too much dilution
It is essential that the borrowers should not dilute their project by giving everyone they know a share of equity. If borrower wants to dilute his business to his family, he must ensure that he is diluting “his” share of the project.