5 fundraising mistakes entrepreneurs must avoid

Are you planning to raise capital for your natural products business? If so, heed this fundraising advice from CircleUp business development manager Katie Fitzgerald. Whether this is your first fundraising round or your fifth, Katie has answers. Here are five fundraising mistakes every business should avoid when raising capital.

Don’t wait to fundraise.

While it’s easy to get carried away with day-to-day start-up business, keep fundraising and cash flow top of mind. If short-term capital is necessary now, fundraising probably should have happened months ago. Fitzgerald warns against looking desperate to investors, so instead, plan ahead and understand cash flow. If more money will be needed three months from now, start fundraising today.  

Don’t assume investors understand the business.

A high-level pitch is necessary, but investors also want to understand the details. Present an explanation of financials, market dynamics, industry trends and historical information. Make sure investors truly grasp the company and how it works. Fitzgerald points out, 50 slides are useless if they never get to the heart of what a company does.

Don’t value a company at odds with the market.

Valuation is key when fundraising. Value the business in a way that interests investors while being defensible and in line with the market. If a company is overvalued early on, it might impact current and future rounds of funding as well as make it difficult to raise capital later. For comparable valuations, Fitzgerald recommends visiting CircleUp’s industry database.

Don’t skimp on resources.

Fundraising deserves as much time and as many resources as other aspects of a natural products business. As with marketing and operations, efforts will not be effective until the correct amount of resources are dedicated to the cause. While organizations such as CircleUp may be great resources, Fitzgerald reminds all entrepreneurs that no magic wand nor easy way exist to work through the fundraising process. Invest time in raising capital.

Don’t end communication with investors.

Investors want to be involved, so don’t treat them like they are secondary until more money is required. Current investors are a great source of future funding and, through continued engagement, they may offer expertise, join an advisory board or introduce new customers. Ensure confidence in a team and business by communicating often with investors.