When starting a new business, the first thing you're going to need – besides a great idea – is money.
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Asif Khan, an entrepreneur whofounded the health care technology firm Caremerge in 2012, said without financial backing, even the most brilliant idea will never see the light of day.
"This is a daily fight for startups as they delicately balance cultivating their billion-dollar idea while struggling to come up with the next hundred dollars to keep the lights on," Khan said. "The reason this is so difficult is because wooing investors is an art and not a science."
To help entrepreneurs master the science of securing funding from investors, Khan offers seven tips:
- Quit your day job and take the plunge: Unless you're a serial entrepreneur who has started and sold companies in the past, investors will not give you a dime if they don't feel you are 100 percent focused on your new venture.
- Show capital efficiency: Demonstrate that you have been able to get a great deal done with minimal to no money. In other words, show that you have done wonders while "bootstrapping." Getting some revenue from at least three clients (proving that there's value to what you're doing) would be fantastic, but other types of traction and validation would help, too.
- Enter competitions and incubators: Things like winning startup competitions, getting selected to a startup incubator, partnering with a large company, are all good ways to show traction and proof that you're creating value.
- Solve a real world problem: Social networking is so last year. While said in jest, there is some level of truth to the idea that the next big thing may have not been conceived yet. The best place to start is to figure out a big real world problem. Nothing gets investors to open their checkbook like identifying a big problem and offering a clear solution.
- Moonshot: If you have spent time in a given industry, you have likely realized its complexity and therefore noticed that one simple solution will not fix everything. The term "moonshot" means that if you need to make something 10 times better, then you have to start from scratch. Visionary investors love this stuff because it's all blue ocean ahead, which means minimal to no competition. The ability to create a new niche segment within an industry is very attractive to investors.
- Go B2B…2C: Everyone loves a good consumer product but even amazing products fail because it's so difficult to get people's attention. On the other hand, businesses have challenges they face on a regular basis due to changing industry needs and other regulations. Most important, they have funds and large budgets to fix those problems. Focus on solving those problems and then it's gravy if you can spin the business model to get their end customers involved.
- Kickstarter: The rise of technology has created new ways to raise capital. This is a particularly effective method for consumer products as the chances are higher that some people out there may want a certain product.
Originally published on Business News Daily.