Recently, I had a chat with one of the members in my private program who is facing an interesting problem with his new business.
After more than 7 years of discussing his business idea with family, friends, and colleagues, he couldn’t convince them to raise enough seed capital to kickstart his business.
He tried applying for different grants and loans, but nothing came through.
All these failed attempts led to frustration, and he almost gave up on the business idea.
The problem was, his ideas wouldn’t let him sleep.
A year ago, he made the bold decision to go it alone with his personal funds and the little financial support he could get from family and friends.
According to his vision and masterplan, he wanted to develop a 50-hectare integrated rice farm – based on a hybrid rice variety.
But according to reality, the capital he had could only develop 3 hectares. That’s really small compared to the initial vision.
In April this year, his first harvest did really well. It achieved a whopping 7.4 tons per hectare, one of the highest yields ever in his region.
But now, there’s a problem
Since the good news started filtering out, he’s been getting calls – from friends, colleagues and family.
He’s had visits from the local media, and the ministry of agriculture in the region has reached out to offer support and partnership.
His farm was recently inspected by an evaluation team from one of the big international development funds.
Apart from the praises and congratulations, you know what else they’re asking?
How can we join? How can we invest? How can we be part of this project?
So, from looking for start-up capital, he now has a new problem – which offers should he take?
What can we learn from this experience?
There are a couple of lessons we can learn from this.
-- Lesson 1: You need to put your money where your mouth is.
There is a reason why bootstrapping is the most common way of starting a business.
All the big names – Apple, Alibaba, CocaCola, Ford, etc – were bootstrapped.
In the early days, a lot of people and investors you meet will not have enough faith in your ideas to risk their money and invest in you.
And the only person who will believe in your ideas strongly enough to risk their money is YOU.
Until you put your money where your mouth is, nobody else will.
If you want to convince other people to put their money on the table, the best way to convince them is to put yours first.
-- Lesson 2: Showing is better than telling.
When you have a brilliant business idea, all you can do is tell people about it.
But if you can show them something, you’ll be more convincing.
If you can show me something, then that thing is a fact.
But if you can only tell me something, that thing will be treated as an opinion.
This is the simple reason why investors ask for signs of validation, traction or growth.
It’s the reason why banks prefer to give loans to businesses that have an operating history.
That’s why entrepreneurs who can show something real are more effective at raising capital than those entrepreneurs who just have dreams, ideas and visions.
It doesn’t matter if it’s a prototype, a demo, a pilot, or a sample. If you’re already a business, you need to show signs of sales, user adoption, or customer numbers.
Whatever you have, show something.
-- Lesson 3: It’s OK to start small.
The truth is, if you’re waiting for enough capital until you build the business of your dreams, you’ll be waiting a really long time.
Building a successful business is a process, it’s not an event.
So, if you’re waiting to hit your financing target before you make that move, you’re missing the point.
All you need is enough capital to get started so you can show something to investors.
And when you show something, you’ll get more capital to improve the business so you can show something bigger.
That’s how the process works.
It’s OK to start small. In fact, it’s wise to start small.
Starting small means you have the opportunity to make mistakes that you can recover from.
Starting small means you can learn and make changes without suffering major consequences.
It doesn’t matter how big your business dream is, there are always opportunities to start small.
The problem is you’re not thinking of those options.
-- Lesson 4: Investors are drawn to success
Investors will invest in those businesses that have a higher likelihood of earning returns.
Banks will lend money to businesses that have a track record of success.
Government officials and politicians love to associate with success stories because of their high electoral value.
The media loves to seek out success stories because they make good news headlines.
Everyone – including your friends and family – will earn bragging rights based on the success of your business.
Anyhow you look at it, success is good for business.
Don’t forget to forward this email to your smart friends so they can learn.
And until my next email,
Always remember:
To increase your chances of raising capital, you need to show something.
Cheers,
Thank you.
John-Paul Iwuoha
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