Tips on how to attract backing for your start-up business

A lot of aspiring businessmen and start-up entrepreneurs are out there right now peddling their ideas in the hope of getting the much needed capital to get their prospective businesses off the ground.

According to one fund manager, there are so many business plans and proposals that land on his desk, but from all of these plans only five per cent actually get the funding they are asking for. The reason for this is two-pronged. One, fund managers are very conscious about the plans that they study. Only the real business gems get the kind of attention that would eventually result in funding or capital infusion. The second is that the sources of development capital for small and medium sized businesses are getting harder and harder to find.

But even with such a reduced number of opportunities for aspiring entrepreneurs and businessmen there are still certain things that can be done to increase the chances of a business plan to be noticed and eventually get the nod of funding managers.

One of the first reminders came from the fund managers themselves. According to them the firs thing to bear in mind is to be more selective in sending out the business plan. The worst thing that you can do is to send your plan to hundreds of venture-capital firms. By sending the plan to many firms immediately, you will not have the opportunity to fix the business plan if ever you get some useful feedback before sending out the next batch of plans.

In the event that the management team gets an invitation to present to a potential investor there are a few points that should be remembered.

First of all, it is quite common to see management teams looking for finance commit the same mistakes. That is, they parade about clichés in their presentations that are meaningless to venture capitalists and funding managers. One of the favorite assurances that is made is how a business plan is “prudent”. This means nothing to fund managers and offer no comfort. Another favorite line is that chief executives are working on a “three to five year horizon for exit”. The reason this is mentioned is because they think this is what fund managers want to hear.

Fund managers advise not using these or any clichés as this only highlights inexperience of the management team. Be confident in presenting the plan and have faith in your plan.

But faith also means being sure of your business and its capabilities. Fund managers recommend that the management team have a clear vision of what their company is capable of doing given the funding that it is looking for as well as a clear understanding how that funding is going to be spent.

Finally, the management team has to remember that venture capitalists invest in teams not individuals or business ideas. They have to be able to show that the team has a breadth of experience in a number of disciplines that will be beneficial for the business. It is also of utmost importance to act like a team when doing their presentation.