Sunday, March 9, 2014

People give money to People not businesses or causes

i recently started The Fundraising Academy. The objective was clear. Train people to raise money for their businesses or projects. As a profession in South Africa it is quite clear that there are thousands of people trying to do positive social projects ( or non profits)....in fact 100,000 of them and they all need to raise money, and there are thousands of entrepreneurs who need money for their business start-ups. The issue of capital raising is an interesting one but i dont think it has changed much over time. Most money is given by people to other people rather than the value of the new idea. What this means and what i teach at the academy is someone will first invest in you and not your cause or business. They first need to "like you" or trust you or beleive in You! This is a difficult proposition for most young entrepreneurs as they promote their brilliant ideas. They need to be promoting who they are and they need to start by building genuine relationships with possible people who can fund their brilliance in ideas. When i listen to a pitch most people sell ideas and causes. They dont understand that a potential investor needs to understand who they are first. In an age of technology, building genuine relationships has become much harder for young people. I mean a young couple can be dating online, thousands of miles away from each other, talk on the phone daily ( sorry i mean on facebook or Skype), for years and never actually meet face to face. What skills are these young people learning? What happens when they eventually do meet and move in together? A disaster. The same applies to raising capital for your business. You need to meet people. Build genuine relationships with them. Let them get to know you and then they might just bet on you. Let me emphasise genuine again and again, as most people who seek money from other people are often not genuine. If someone doesnt give you money its not personal. But that relationship needs to be. When i hear young people pitch new innovations they fail to build this connection between people. The idea is rarely strong enough. The other option to raise capital is to go to a bank ( good luck), go to the government ( better luck). This form of raising capital has and will always work. However let me throw in a quick caveat. Crowdsource funding may just change the game altogether. Where millions of ordinary Joe's fund other ordinary Joe's, anywhere, anytime. If you cant make this work however you will still need to revert to the old ways....people give to people not to great ideas.