Last Wednesday afternoon, Raffles Financial who sits together with us at our hub in Shatin, Hong Kong, conducted a workshop sharing on the topic of “How to Raise Funds and Expand Your Business”.
The speaker, Dr. Charlie In, is the Chairman of Raffles Financial, a diversified financial company with an interest in pre-IPO investments especially in China and the Greater Bay Area. As a veteran in the investments and fundraising industry, he shares with us his insights and tips on some to-dos and not-to-dos when fundraising from an investor’s point-of-view.
Below are 5 key tips he has for all entrepreneurs. If you are planning to, or in the process of fundraising, do take some notes!
1. Bear in mind the Matthew’s Principle
Dr In started off his workshop by reinforcing the Matthew’s Principle concept.
While the principle is commonly summarised as the adage whereby, ‘the rich gets richer, and the poor gets poorer” in society, from an investor’s point of view, it concerns an investor assessing a potential company and wondering,
“If I invest my money in this company, will the company maximize and multiply it or not?”
As cliche and obvious as it sounds, this remains the key concern of any investor. Thus, any pitch to an investor should focus on touching upon the message of how funds invested in your company will increase and multiply in value for the investor.
2. Cash is still important
Most startups, especially tech-driven ones, would be dedicating much money and resources to developing its team, product and technology in its initial months, if not years. Also, many might still be in the process of fine tuning their business models and have not generated profits, much less cash flow yet. After all, today, we know of many big tech companies with sky high valuations who have yet to break even and still making billions in losses. Examples include publicly-listed Tesla, Spotify, and Lyft (which recently IPO-ed), and private companies like Uber which is will also be going public soon.
However, as much as it seems that investors now see the bottom line as something of the past in fundraising, these star unicorn companies remain outliers – cash flow and the likelihood of profitability remain on top of most investor’s minds.
Funds raised will eventually be used and if investors do not see a viable way for the company to generate revenues and cash flow self-sustainably in the future, it would be a huge red flag.
So how do your venture/company’s (potential) cash flow cycles look?
3. Show you can be smart about your use of capital
Similar to the concept of the Matthew’s Principle and the cash flow issues above, investors like to see companies that can be smart with using the money that will be invested in them.
In Dr In’s words, “Why buy things when it makes it cheaper to lease or borrow them?”
A business that can demonstrate their commitment to being frugal and stringent with their expenses even after raising a huge sum would more often than not attract more investors, while at the same time cultivate a better reputation than others over time.
4. Nobody in the team should be indispensable
According to Dr In, a key concern that investors have is the continuity of the business, mainly – if you or any member is no longer with the company, will the venture still be able to operate?
No one should be deemed indispensable to the company, or else it presents a high risk to the investor. What would happen if the star performer is gone? Can the company survive?
Even for new or sole founders just starting out, a plan to grow and develop the team should be in place in the future.
5. Choose the best person to present to investors
Most of the time, it is assumed that it is the CEO or the Founder of the company who presents to potential investors.
However, Dr In stresses that this need not be the case! Rather, choose the right person for the job – the one who knows the business well enough, and has the right personality, charisma and swagger to engage and communicate with investors.
Impressions truly matter! Don’t you all agree?
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