All you need to know when it comes to fundraising is what no one is telling you:
Funding is not a mechanical process, it is a human process:
Financing decisions are as emotional as they are rational.
This has two main implications:
You are more likely to raise funds if you take advantage of your passion, not your skills. Taking advantage of your passion, you are more inspiring and resilient. You are also more likely to raise funds if you create wealth instead of making money. The subtle difference in intent between creating wealth and making money creates a big difference in the outcome of your actions. If you are mindful of wealth creation, grow the economy and take a piece of the wealth you are creating for yourself. Then it is more likely that others will follow your vision and collaborate with you, as they may also share your overview. If you’re looking to make money, you’re likely to capture some of the wealth that already exists for your own benefit and make it harder to get support from others. Creating wealth is a much more powerful proposition than capturing wealth. You can’t create wealth if you’re not passionate about what you do.
This is particularly important in the case of Angel investors, but it is also relevant in the case of people who make the decision to invest (venture capitalists) or to lend (bankers) on behalf of others.
In the case of those who provide financing, the return on investment is an important consideration, but not the only one. The individual who makes the decision to contribute funds or resources also considers the likelihood that you will achieve what you promise, how you relate to the two, and in many cases, the comfort you have with your project. What you promise to accomplish must be meaningful to the person making the decision to provide that cash or resource in whatever role you are playing. The connection of the person with you and your project plays an important role. For example, the same person may be a family investor, a venture capitalist, a lender, or a collaborator for different projects.
Different funding mechanisms and sources of funds have different needs for the investor. Make sure you understand the differences between equity financing, or debt or financing. Equity provides capital in exchange for a reward for the wealth created. Debt provides capital in exchange for a future capital payment plus interest. Definancing is a creative way to use resources instead of capital and reduce or even eliminate cash needs.
A good business becomes an irresistible proposition when the objectives and needs of capital supply and demand are well aligned. Companies don’t make decisions, people do, and we can’t rule out the human nature of the fundraising process.