Carrying out a venture successfully is not a simple task at all. Not only do you have to face the various challenges of transforming an idea into a real project, but you also have to face one of the biggest challenges in the entrepreneurial field: fundraising. Randall Castillo Ortega, the founder of SME backer RACO Investor, explains how to search for, and receive, financing for a unique startup that doesn’t follow a conventional model.
There are simple alternatives, such as accessing a loan from a conventional bank or by issuing debt. However, these alternatives generate a payment obligation that could threaten the financial future of the startup. To avoid this inconvenience and get the necessary capital, there is the possibility of partnering with investors, human or corporate, willing to enter the fascinating adventure of the entrepreneurial ecosystem.
Unlike other financing alternatives, in this case, it is not a matter of completing a simple form or contacting a company focused on corporate finance. Still, you have to appeal to somewhat more “personal” and “traditional” factors.
The first thing to do to get an investor to associate financially with a venture is to investigate the competition. Unlike what happens when developing a product or service, in this instance, you have to observe who is behind the companies. Asserts Castillo, “Obviously, the objective is not to capture the attention of investors who have money in companies that compete directly with us, but of those funds or billionaires who are navigating the environment and interested in the subject in which we develop.”
Once you locate potential investors, you must study them in depth – find out if their investment philosophy is compatible with your solutions. Ask them what the average amount of capital they usually allocate to small companies is. This and more questions will help you determine if they might indeed be interested in our project and what we have to offer.
It is often said that partnering with an investor is like getting married. This means that your partner must complement us, contribute to the business and agree with the future. Because you have not yet bonded with the investor, the closest thing to knowing and estimating how the relationship might evolve is to talk to founders and executives of other startups in which you have invested.
The key at this point is to clear all possible doubts: was the investor useful? How long did the operational process take? Were there legal conflicts or inconveniences? Each situation is unique, so the questions to ask will vary greatly from startup to startup or investor to investor.
“When contacting other founders,” explains Castillo, “it is also important to consider that not everyone will be so helpful. On some occasions, sharing investors is not usually an option, either because of personal issues or because there are plans behind the startups that cannot be revealed. Therefore, we must not stay with a single opinion, but we must investigate and consult with different sources.”
The last step is the most challenging: creating a bond with the investor. Ready, we have found the ideal background and everyone has given us good references for it, now it remains to draw your attention so that you can finally associate with us.
In any “normal” environment, the logical thing to do would be to simply talk on the phone or send an email. However, we are talking about a possible multi-million dollar investment in a startup that is likely to aim to change the world. What does all this mean? That we will have to go back in time to when technology did not exist.