Ways of Getting Investors to Your Start-up
We share tips that will help you attract investors' eyes and make your business a more attractive investment
Some businesses are a great fit for business loans, while some are perfect for investors. If you're unsure which funding source is an ideal fit for your business, I refer you to our article, "Should I Have Investors or Get Business Loans?" It'll help make the decision easier.
However, if you've decided that your business is the right candidate for investors, but you're at a loss about meeting said investors and convincing them that your company is the best thing ever? Then this article is for you.
This article will share tips that will help you attract investors' eyes and make your business a more attractive investment.
Attracting investors is typically a complicated process; to get started, we have created a list of qualities your start-up must have in place before approaching potential investors. If your business checks off each of these items, you're more likely to be taken seriously. Apart from that, you'll be more confident.
Create a Formal Business Plan
Having a written plan that shows how you plan to take your product from concept to the consumer is essential for not just potential investors but also your business growth. Your business plan should explicitly state your company's objectives, target market, milestones, and feasibility.
Define Your Product's Feasibility
Clearly state your product's target market. If you have competition, you will need to prove how it differs and stands out from the said competition. State your pricing structure and anticipated sales.
Set and Achieve Milestones
Your business plan should ideally state clear, reasonable, and achievable milestones. If your business has been in operation for a while, you should prove that you have achieved some of these milestones. You should also show how you plan to meet the next milestone and the lessons learned from the previously-achieved ones.
Attract a Well-rounded Team
Your team members have almost as much importance as the product you sell. Your team members' quality is a statement of your product's viability; ensure you select leaders in your industry with reliable personal track records. The more members on your team with reliable track records of prior successful start-up experience, the better.
Have an Advisory Board of Experts
This acts as a form of social proof. It should typically consist of experts in start-ups within your vertical, influencers, experienced executives, and connectors in your market space. Having an expert-based board exhibits product potential to would-be investors, and it increases the odds of your business getting the nod.
Produce a Minimum Viable Product
Presenting a product that's ready to go into the market or a prototype shows potential investors that your team can create a product, rather than talk about it. It also enables potential investors to have a first-hand experience of their would-be investments. You do not have to have a perfect product; it's okay if the product needs improvements upon its design; just have a functioning product ready to present to investors.
Show Actual Customer Engagement
Having people purchase or pre-order your product and then provide feedback considerably increases your odds of getting funding. It shows that you can create, distribute, and get your product to the right audience. Another good indication of engagement is if you have people contributing to Kickstarter funding. Having pre-orders, purchases, and a strong Kickstarter backing show your service/product is a viable one, even if it needs to be revised.
No Customers Yet?
If you do not yet have customers and feedbacks, producing Letters of Intent or Endorsement is the next best thing. A Letter of Intent or written endorsement from a significant customer is outstanding traction to present to potential investors. It shows that you can make the connections required to grow your company. While having a real purchase order or contract from an influential customer is so much better, however, an LOI would do. Having both shows that you have a partner relationship with a known brand, prospect pipeline, and distributors' connections, which bolsters your credibility.
Acquire Intellectual Property Registration
Having official documentation helps authenticate your level of commitment. Register a trademark, file a provisional patent, and reserve your business domain names. These things cost very little money but do wonders in convincing investors that you are serious about your business.
Show Personal Investment
Investors like to see that you also have committed personal funds to your business in addition to your time. Be able to give a breakdown of how you have used said funds to move the company to its present stage. Investors would be skeptical about risking their money if you haven't risked anything yourself or misused initial funds. Apart from cash, investors would also gauge your apparent commitment to the business. They want to see your investment in your business as something more significant than a weekend project. Proving that you are vested full-time on the project will further increase their confidence and improve the chances of them buying into your idea.
Know Your Investors
It would be best to look for investors the same way you look for your product's target market. Browse the various crowdfunding platforms for access to various types of investors. Take the needed time to study the sites thoroughly to find the most suitable fit for your business or start-up. This helps you concentrate your search, thus allowing you to save energy and time.
Ways of Getting Investors
To attract investors, you should do all you can to stand out. Having a growing social media presence and showing steady progress reflects a business built on a reliable foundation. Providing documentation such as letters of intent, your business plan, and intellectual property shows that you are taking your start-up seriously.
Know Your Product
You must have a robust and professional business plan. It is not enough to merely believe in your ideas; you must back up your ideas with testing and research. If your business has a product, keep a working prototype handy to show interested investors. This convinces then that you have done your homework thoroughly, and your business is ready to go.
Know Your Pitch
Completely know your business facts, rehearse your pitch several times over so you know it well, and present it anytime.
However, care should be taken so that in "knowing" your pitch, you do not become robotic and detached when delivering it. Anticipate questions an investor might ask and have the answers ready. Be professional and calm, taking care not to be defensive or over-aggressive.
Try Soft Selling via Networking
The number one tip for new entrepreneurs is usually Networking, and this is true for a good reason - Networking lets you pitch your start-up in a more organic, less formal fashion.
If you are building a great business, taking the time to network within your local start-up and investing community is a fantastic way to meet investors. Most investors' meetings can be scheduled simply by mentioning your business while at an event.
While it looks like this might be a little awkward on the surface, and most entrepreneurs fear that they would put off investors since they're still trying to sell their business. However, that's not the case. When you mention your business, any interested person will keep the conversation going, while anyone who's not interested would decline politely. When done accurately, the organic soft-sell method makes investors more inclined to consider your business. This is because you are not just pitching your idea; you are strategically relying on the social capital developed because of the networking process to influence their decision.
Show Results First
This can be quite a difficult cycle to break. You require money to get clients; however, you need clients to make money.
While admittedly quite tricky, it is worth making an effort to get a few users or customers before approaching an investor. Create a plan to get your first set of buyers that do not depend on sizeable outside investment.
This is particularly important if you are a first-time entrepreneur, as it is considerably easier to obtain investments on good terms if your business has some traction first. Investors require you to prove that your business will succeed, and nothing convinces them of this fact better than having actual paying customers.
Ask For Advice
Rather than cold calling investors and begging them to invest in your company, consider requesting to pick their brain first. Emails or cold calls asking investors to invest in your start-up usually come off as desperate. Instead, approach investors you admire, asking for advice.
By first reaching out to an investor for advice, they might develop a bond with you that will, later on, result in a greater readiness to invest in your company. Asking them for advice not only shows them that you value their input, but it also gives them an opportunity to point out likely flaws in your business.
You are not just selling your services or product when you approach investors; you sell them on your team. Most investors actively lookout for talented co-founders rather than a single founder. However, do not take on just anybody on your team. Picking the right co-founders is a sensitive process, as having the wrong co-founders can be more hurtful to your company than having none.
Finding the perfect co-founders would make the starting process infinitely easier even beyond attracting investors as having partners you can rely on is a massive boost for your business.
Pitch a Return on Investment
While investors might be interested in your business because they believe in it, most investors' ultimate goal is to make money on their investments. Hence, it's necessary show just how you will get the profits on their investment as investors ultimately want to know what they'll gain by investing in your business. A sure way of standing out and getting their interest is to precisely illustrate what, when, and how you'll give them a return on their investment.
Join a Start-up Accelerator
If you're a first-time entrepreneur, applying to reputable start-up accelerators is recommended as it not only grants you access to their network, it adds credibility to your start-up.
Joining an accelerator can be of immense help to new start-ups as you'll gain access to valuable mentorship opportunities. While this does not by itself guarantee that you will get investors immediately, it makes your business a more appealing investment choice.
You would indeed have lots on your schedule once you begin seeking investors; however, if you tell a potential investor that you will follow through, you should do that. Fundraising is usually not a quick process; hence, it is recommended that you engage potential investors before you need the funds.
A bit of sound advice for keeping potential investors in the loop is letting them know where your business currently is, where it'll be at the closing of the next round, and what their investment will enable you to do.
Share User Engagement and Metrics
When it comes to attracting investors, showing that people like and are actually using your product is one of your most significant assets. One of your biggest weapons going into a pitch is your users' reviews. Prepare a spreadsheet listing your top customers; for each name in the list, add additional data such as how long they have been a customer, quotes from them, how much they pay, and when applicable, how many times they have upgraded their plan.
This information not only proves that people are interested in your business, but it also demonstrates your commitment to its growth.
Take Advantage of Online Fundraising Markets
While networking in person is powerful, your location should not limit you to seeking investment.
With the prevalence of fundraising platforms such as CircleUp, Gust, and AngelList, no longer are you restricted to your immediate vicinity when trying to raise money for your company. Simply post your company to one of the above-listed sites (or others just like them), highlight your best metrics, and you should find investors in your chosen industry.
Use Feedback to Improve
You will most likely be met with more rejection than acceptance when you begin looking for investors for your start-up. Increase the odds of the next pitch being successful by using their feedback to improve your business.
Customers Call Your Business, Not Your Cell Phone
Tired of using your personal cell phone number for your business? Give your business its own phone number.
No additional hardware is required. Use it alongside your current phone. Customers will see your business number when you call them. Not your cell phone number.
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