Offsite construction is hot. Every week, startups and entrepreneurs throw their hats into the ring, bringing fresh ideas, designs and building techniques. But they must first face a harsh reality — the difficulty of raising capital.
A great idea is only half the battle. Unless you have a cool ten million stashed away, you’re going to need investors.
If you’ve watched Shark Tank, you know the drill — aspiring entrepreneurs pitch their businesses to wealthy investors, hoping for a check and a chance at success. Some walk away with deals, others with bruised egos.
The good news is you don’t have to beg Mark Cuban for funding in front of a million viewers. The bad news is that pitching to a real-life investor can be just as nerve-racking — or worse. And unlike Shark Tank, where deals happen in minutes, real-world investors put you through months of scrutiny before opening their wallets.
Before starting down this road, you need to understand the three main funding sources: Venture Capital, friends and family, and Angel Investors.
Venture Capital (VC) is the Holy Grail of startup investment — huge sums of money managed by professional investors. It comes from ultra-wealthy individuals, insurance companies, university endowments and corporate investors.
The catch? Venture capitalists expect massive returns, and they only invest in companies that can scale quickly and generate millions (or billions) in revenue. If you have to ask whether your startup is a VC candidate, it probably isn’t.
Borrowing from friends and family, is, in my opinion, the worst option. It’s tempting to ask your uncle for cash, but if professional investors don’t believe in your idea, why would your relatives or friends? And if the startup fails (as most do), you will lose money and relationships. It’s a recipe for Thanksgiving dinner disasters.
Your best bet is Angel Investors (Angels). These are wealthy individuals who put up their own money, and who need to meet US Securities and Exchange Commission (SEC) criteria for accredited investors — a net worth of at least $1 million (excluding their home) or at least $200,000 in annual income ($300,000 if married).
Although Angels are more accessible than VCs, they don’t throw money at everyone with a cool idea. They’ll scrutinize your background, business plan and ability to execute. Finding the right one is like dating, but with more rejection.
First, don’t use email templates. Investors can sniff them out from a mile away, and won’t bother reading them. Angel Investors have specific industries, funding amounts and stages they invest in. Their websites outline exactly what they’re looking for so if your project isn’t a fit, don’t waste their time or yours.
Next, get an introduction. Look for people in your network who have connections to offsite construction investors. This will skyrocket your chances.
And forget about the 60-second elevator pitch — be ready to describe your business in two sentences that are intriguing enough to grab investors’ attention. If this goes well, follow up with a well-crafted, one-page summary or a short, high-quality video explaining your business.
If an Angel likes your pitch, it’s time for the Shark Attack — they will tear apart your business model, challenge your numbers and question your ability to execute. If you can’t handle the heat, you’re not ready for investment.
You also need to accept that if you do get funding, your business plan will change. Investors want input on everything from your pricing to your supply chain. If you’re too stubborn to adapt, you’ll lose their support.
If an investor rejects you? Find out why. Their feedback is gold — use it to refine your pitch and business model. You might even end up going back to them in six months with a better plan.
Finally, expect that most investors will say no. But that’s okay. Every “no” brings you closer to a “yes.” The key is persistence. If you truly believe in your idea and are willing to adapt, learn and hustle, you will find the right investor.
You’re going to have to kiss a lot of frogs before you find your Angel.
