If Raising Capital Were Easy, Every Entrepreneur Would Be Funded
Karl Dakin
Capital Coach | Stakeholder Investor Campaigns | Design, Stage, and Manage or Support | Reduce Time, Money, and Risk of Raising Funding | Increase Probability of Success! | Opportunity Management
I was asked, “Why is raising capital so hard?” As I was preparing to answer by listing all the common challenges to raising capital, I stopped and asked myself: “Why would anyone think raising capital would be easy?”
?As a capital coach, I repeatedly tell entrepreneurs that they are not entitled to capital. There is no law, regulation, or government program that states that if you start a business, you will receive all of the capital that you need. There is no cultural mandate that everyone must follow to ensure their continuing acceptance in society. So, why is there this apparent expectation by entrepreneurs that they will obtain capital for their startup business and that raising capital will be easy?
?I see many causes for the perpetuation of this myth of entrepreneurship.
?First, the character of an entrepreneur is one of going out and doing something that has never been done before. A person who believes that their new product, service, store, or marketing scheme will be successful regardless of the odds, will also believe that they can raise capital regardless of their experience or understanding of why investors make investments.
?Second, the media popularizes successful entrepreneur stories. Included in the “I Got Rich” story is a common sub-theme that the reader of the story is every bit as capable and competent in starting their own business. If the reader simply engages in business and becomes their own boss, success will follow.
?Third, an industry exists around encouraging people to quit their jobs and start a business. The only thing that stands between a person and success is one more product, service, membership, or attendance of an event where the entrepreneur will be blessed with the knowledge and inspiration to go out and realize their success.
?None of these causes actually make a difference in raising capital. As a result, most entrepreneurs fail to raise capital. The statistics are available for study that most startups fail and one of the most common causes of failure is lack of enough capital.
?Successfully raising capital requires planning, preparation, and time. It is complicated. It is hard. Most stories of raising capital, whether told by the entrepreneur, the media, or others, leave out these details and emphasize just the outcomes.
?Successfully raising capital for a business is like raising money for any purpose. It is the establishment of a mutually beneficial relationship:
·?????? Not everyone will qualify as an investor
·?????? The benefit to the investor must equal or be greater than the benefit to the entrepreneur causing the investor candidate to have sufficient motivation to invest
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·?????? The investor needs to know you exist, understand your offer, and trust the entrepreneur to perform
·?????? The identification of appropriate investor candidates, the framing of funding proposals that benefit the investor candidate greater than all of the other offers that they see, and the presentation of an offering where an investor candidate will see and react to it, requires planning, preparation, and time.
?Most pitches by entrepreneurs are simple ‘you will get rich buying my stock’ slide decks that fail all of these requirements. They are made to people who will never invest. They propose a benefit that may never happen and looks like all other pitches. They do not understand you, your business, your market, or your products and services.
?So, the real question is: “Why are any entrepreneurs successful in raising capital?”
?The answer is that they have addressed the complexity, given thought to who may care enough to invest, and done the work to tell their story in a way that motivates investor candidates to choose them and provide them with funding.
?The four primary challenges of raising capital will be addressed in my upcoming Motivated Money Half-Day Workshop on September 13th from 8 am to Noon MDT. For more information, go to:
Karl Dakin
Dakin Capital LLC