Because we live in a fast paced, immediate need fulfillment society, there is the unrealistic expectation on the part of entrepreneurs and business owners that people with money are willing to finance our hopes and dreams and let us start living the good life faster than is realistically possible.
Start up capital is hard to raise for one very important reason…the request for business financing is based on theory not practice.
While every would be entrepreneur or serial entrepreneur is convinced that their latest idea or plan is sure to succeed, statistics related to business failures in start ups would prove otherwise.
As I mention to individuals that call me to help finance basically their business plans, debt financiers and equity investors are looking for those individuals with the good ideas, accompanied by the proof that they’ve figured out or learned the first thousand things required to make money in a given business pursuit.
The analogy I will typically provide is that most entrepreneurs or business owners with a great idea and solid market opportunity available have done a great job of learning the first hundred things that are important for them to make money in their chosen en devour. However, at that point in the evolutionary process of getting to market, they start asking for large sums of money to accelerate the process.
In most cases, people with money are not interested in funding those who have not been able to get further down the learning curve, closer to the knowing of the thousand things that are important unless its some kind of mind blowing surefire thing a ma jig.
In the early stages of developed, no matter how well the business plan is written and how thorough it identifies and addresses all significant risks to moving forward, its still all theory.
What I mean by theory is that it hasn’t been done yet.
Moving from theory to practical application where actual results are generated, measured, and shown to be profitable is the ultimate pathway to finding all the business financing you could possibly require.
In order to accomplish this, the entrepreneur or business owner needs to figure out what the smallest possible scale he or she can work at to achieve the desired result and how much money will be required to develop and implement this smaller scale model of the grand design.
This is going to be a much smaller amount of money to locate than the big picture funding most are looking for, and in the event that the mainstream market is still not interested in funding, the requirements may be small enough for bootstrapping and the recruitment of investors from the friends, family, and fools section of the market.
Once proof of concept and practical, measurable results are in hand, its going to be a lot easier to get someone to take you more seriously.
Of course this approach will likely mean slowing down the march to market domination and will put off the quest for larger development dollars until one or more economic cycles of the business model can be completed.
But by taking the long way around, you’re going to go through the learning process in much more depth and get closer to the thousand things you need to know.
Or, you can continue to aggressively look for overly aggressive money in the hope that you will be one of the lucky few with more ambition than practical proof of concept that will get the funding necessary to carry on.