What Black-, Women-owned, and other minorithy Businesses should know about raising capital

The following article by Herbert was published by Black Enterprise.

When raising capital, minority business owners must shift their mindset to focus on the numbers with a concrete, evidence-based rationale for why their companies are good investments. Less than one percent of American venture capital-backed founders are Black, and the percentage of minorities and women in decision-making roles in venture-backed companies is not much higher.

At HI Mark Capital, a Black and veteran-managed fund based in Charleston, South Carolina, we know firsthand the challenges that minority- and women-owned businesses face when it comes to raising capital. Based on hundreds of pitches and conversations from eager, energized entrepreneurs, there are three key ingredients that help increase chances in securing funding.

You should understand what an exit looks like for your company

While many dream of building generational wealth, it’s important to think long-term when considering what an exit might look like for your company. Begin with the end in mind and define clear measures of success for your company. Rather than thinking about generating wealth for your children, shift your mindset to creating a base of wealth for your grandchild’s grandchildren.

Business owners should have a knowledge-sponge mentality and learn how other companies have found success. For example, in South Carolina, we have SizeUpSC, a tool offered by the SC Department of Commerce that helps companies understand how they fit into the competitive landscape in the state and in the U.S. and allows them to compare their business performance to industry competitors. The Lowcountry Minority Business Accelerator is also a great resource for minority entrepreneurs. Lean on existing data when possible to understand what a realistic and successful exit looks like.

Be passionate about your business, but dispassionate in presenting it

Keep your rejection EQ high and practice your pitch with just five words. It’s also important to remain cool, unbiased, and dispassionate about your business when presenting it to others. Over-explaining a concept or revenue model will work against you, but focusing on the facts will put you at an advantage.

Do your homework about your audience and consider whether you really fit into their particular investment theme. One of the best pitches I’ve heard came from Selena Martin, chief executive officer of the Denture Care Shop in Charleston, a company that 3-D prints dentures. She sets the bar high when it comes to keeping her cool in these conversations. To be more like Selena, consider writing 25 questions you anticipate during a pitch, then practice your answers in five words. Consider QA’s two-day Present with Impact course to fine-tune your presentation delivery or Dale Carnegie’s interactive live Present with Impact webinar.

Keep your financials simple, but be prepared to go deep

Business owners tend to make the mistake of preparing their financials based on the product or service they are going to sell. Instead, shift your paradigm to creating a cost budget. The key is asking for a fixed dollar amount and knowing exactly how you plan on using those resources. A good asset test, if you believe you have a scalable company on your hands, is accruing $300,000 in topline revenue over 24 to 36 months. It’s crucial to set a concrete and achievable benchmark for your company.

In order to secure capital, it’s extremely important to have a concrete plan, use data to make informed decisions, and focus on the facts when presenting your business. These techniques will help you go beyond just building wealth for the next generation, but also create a company whose success will resonate decades into the future.

We hope that in the process of supporting minority entrepreneurs with their business goals, we can help business owners achieve the goal of building generational wealth not just for the benefit of their families, but to help close the wealth gap for minority groups overall and grow the number of minority business owners whose companies see massive success.

 

 

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