Last week Business Connector ran the Challenge the Funder! event in Sydney with a series of funding experts coming together with small business owners and start-ups, to define varying methods for receiving funding, including an analysis of which funding methods work best for specific business scenarios.
The evening was eye-opening for a variety of reasons, not least of which was the range of businesses seeking answers about how to break through the business growth barrier. But one thing that really stood out was the varying perceptions of funding risk. Mark Zuckerberg once famously said “the biggest risk is not taking any risk. In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks”. But for funders, there’s a world of difference between taking a purely financial risk, and taking a reputational risk, or taking a risk on the assets and partnerships you have.
For funders, risk is entirely dependent on the nature of intended outcomes of investment, rather than outputs. Sure, for banks, the outcome is merely financial, and funding is based on the economic viability of the investment. But for other funding sources, while the economic viability of a business is important, funding risk is tied to more fluid concepts.
|BANK||ACCELERATOR||VENTURE CAPITALIST||ANGEL INVESTOR||GRANTS||PROPERTY, ASSET INVESTOR|
|Long term gains
Long term gains
Value addition of the business
When preparing a pitch for funding then, it’s crucial to be focusing on the ROI peculiar to the funder of choice. There’s no point talking about the market potential of your product if an angel investor or accelerator, for instance, is more interested in hearing about how they can help you.
Funding is an art that requires a great deal of analysis to discover the best match for your business. Business owners need to understand what they expect funders to be investing in, and what values they have in common with their funders. As Warren Buffett would say, risk comes from not knowing what you’re doing. And when it comes to achieving funding, you need to know what is valued to know what’s at risk.
Come and meet the people who actually decide the fate of your funding. Whether you get a yes or a no. Learn from the experts whose job it is to get entrepreneurs and business owners just like you funded.