Getting funding from people you know has its own perils. For example, having to sit with your investors and answer all sorts of business questions during a holiday meal.
Carol shares her insider’s tips on the Bank of America Small Business Community in the second article in the series, “Small Business Guide to Raising Capital, Part 2: How Much is Family Worth to You?” Carol begins:
This is the second article of a three-part series on capital-raising mistakes you can easily avoid. If you missed the first post, can check it out here.
Mistake #5: Underestimating How Much Time it Takes to Raise Capital
Almost everything in business, particularly those things outside of your control, takes more time than you expect. Raising capital is one of those things. This is especially the case when raising money from individual investors. Even when people tell you they are going to invest in your business, it is difficult to get them to write the check. Getting people to part with their money is like trying to get food away from me when I am hungry; a tough task!
People will wait as long as possible to part with their “Benjamins.” Just ask the federal government what percentage of tax returns get sent in at the last possible moment (on or around April 15th) and how many taxpayers file for an extension. You may have to pry that investment check out of your investors’ hands.
Even with loans, documents need to be put together, processed, reviewed, put through bureaucratic processes and ultimately signed. This takes time and lots of it.
How to avoid this mistake:
Mistake #6: Assuming Your Business is Fundable by Sophisticated Investors
Most business models aren’t big enough to attract the attention of sophisticated investors like angels or venture capitalists.
You can read the rest of the post here.