If you are an entrepreneur and feel that your startup is now at a stage where you need the support of investors, there are a few challenges that you must be ready to face. Finding the right investors, who will be willing to listen to you and then believe in your idea enough to put their money behind you, can be quite an arduous task.
With angel investors and venture capitalists getting bombarded with investment requests from entrepreneurs, how can you ensure that you grab their attention? You have to get some basic things right so you can find the right investors who will be genuinely interested in your company.
Here are a few things that will prove beneficial from the perspective of getting investors on board:
1. Show your readiness, not need
It is important for you to put forth a business that is ready to grow with an investor’s push, and not an idea that needs the cash for survival. Your business must have proven sure shot success, albeit small, and the model that you present must be scalable. If you can exhibit sound experience and know-how to handle your business, investors can be better convinced in your ability to drive the same.
At the same time, do show some available cash, so the investor does not get the feeling that you are approaching him/her to bail you out because you are financially bust. If you do not have some money up your sleeve, the terms of investor agreements may work out to your disadvantage as seasoned investors may work out the deal with harder clauses for you.
2. Traction should demonstrate that demand already exists for your product/service
As a startup looking to raise funds, ensure that the business concept is need based, i.e., you need not spend time and resources to figure out how to create a demand for the product or service you are selling. There should already be a demand for that product/service and it should reflect in your traction.
3. Clear up debts and have minimal credit
It is extremely important that you have minimal credit lined up in the market or no debts to pay back. Have a clear report of your credit status, because investors are going to seek out these details very carefully. The perception and sentiments of your creditors can have a great impact on your goodwill, so do a thorough check of your credit report and loan payments, where timeliness and clean transactions will be in your favor.
4. Do your homework on investors well
Be prepared to understand your needs and the type of investors your startup will benefit the most from. Make a list of potential investors; reach out to fellow entrepreneurs to take feedback from similar experiences to narrow down your list. Reach out to investors via your website, social media and the like. Attend seminars and conferences where investors are ready to meet fund-seekers. Having a deeper knowledge on how the investor world works will help you make a better pitch and build stronger relationships with your partners/investors.
5. Be thoroughly compliant
Investors are looking out for reasons to accept you if they like your idea. When you follow all compliances for legal and financial matters in a professional manner, as required for a thriving business, it sends out a strong and positive message to the investors that you like to run your company by the book.
6. Make a detailed business plan
Devise a strategy, and show a business plan with measurable timelines, financials, metrics and parameters mapped to your goals. Be realistic – too much optimism for quick growth may be considered as lack of maturity. Work out for the best case and worst case scenario and project somewhere mid-way. In fact be open to present how the cash is flowing within your company, how much you spend, even though you are not making a profit. This can be extended to project the point where you will start to make profit. A clear outline for the next couple of years is a good baseline to get the investors to your side.
Also make sure that your plans, vision and current position are clearly visible on your website and social media sites.
7. Have streamlined processes
Instead of working ad-hoc on your idea, spend some energy into organizing the process flow, marking clear-cut processes and sub-processes that are repeatable for smooth scaling up, and trackable for smoother control. Line up a team if possible to take care of sub-processes, with their roles clearly defined. Get on board creative energies, even if you cannot pay them well with a promise such as equity options, and they will ensure that your setup is organized professionally as a business workforce should be.
8. Fine-track your networks
Getting the right investors to listen to you can be a painful task. Investors get hordes of pitches, so it is best to try and go via a common business contact who can put in a recommendation for you. Leverage your investor/mentor network to find the right investors. Connect with your common contacts and explain your business to him/her before he/she makes your introduction to the investor. Share a short synopsis that can be used as an introduction in an email or a chat session between the contact and the investor. Do not hesitate to reach out to as many levels of contacts down the network that may be required.
9. Keep your elevator pitch ready
Being proactive and keeping an elevator pitch ready will be an advantage when on the lookout for investors because it’ll help you give them a clear picture about your business and get them interested. Especially when 5 minutes is all you may get to pitch.
Just remember not to be disappointed with rejections in this arduous process; rather use each as a learning experience to make a better case next time. Be open to changes for adapting and adopting new ideas. Keep the above points in mind for a successful bid to investors and get on your way to success!
Disclaimer: This is a guest post. The statements, opinions and data contained in these publications are solely those of the individual authors and contributors and not of iamWire and the editor(s).