8 Tips on How to Secure the Right Investor for your Startup!
Businesses need capital to scale and on-boarding an investor is a tricky task. As the custodian of your idea, you want to find someone whose vision aligns with yours and is the right culture fit for your Startup. Below is a general guide on the groundwork needed to identify and build the right investment partnership.
Before you look for an investor, reflect on the following:
1. What stage are you at with your business?
Suppose your business is in its initial stage such as the pre-launch stage, or maybe you have just gone to market. In that case, you may benefit from reaching out to friends and family or approaching an angel investor.
Once the market begins to accept your product or service and your business experiences growth, you will need to diversify your capital streams. At this stage, you can approach a Venture Capitalist (VC), a Micro-lender or even a Super Angel Investor, which is a hybrid between an Angel Investor and a VC.
2. What is the level of involvement you are seeking?
An investor does more than just fund business. Angel investors may play an active role in business decisions, which can dilute the executive control you have as an entrepreneur. However, they also bring with them business acumen and a network of industrialists you could leverage.
VCs tend to invest in many industries and have a pool of resources available to them in the form of industry and market experts, financial advisors etc. When approaching a VC, find one whose experience is within your industry. In doing so, they will understand your business model, and provide mentorship to help you grow. You can also network with other founders in their network.
Once you have identified who to approach, the real work begins. The next step is to do your research, develop tools to pitch your business and acquire an investment partner.
Use the internet to your advantage. Look up investor directories, shortlist those that are within your industry, visit their websites, understand their vision and eliminate investors whose goals do not align with yours. Remember, time is your most precious resource, so only approach investors who you believe will build a mutually beneficial alliance.
4. Be professional
If you have the contact details of an investor, emails are often the most professional way to approach an investor. If they do not have a website or easily accessible contact details, use business networking platforms like LinkedIn to find mutual connections through direct messaging.
5. Develop your pitch
Investors look for a combination of stories and spreadsheets. They want to see your passion, understand how you discovered a gap in the market, how you seek to resolve it, if the market can sustain without this solution, etc. What is their ‘reason to believe’ in your idea? To answer them, you need a sales pitch.
An effective sales pitch is concise, visually appealing and has all the information an investor needs to decide on whether to partner with you or not.
This information includes the problem you are trying to solve, the solution and its scalability. It also contains information on the current market situation and projections after the introduction of your product or service. To strengthen your pitch, case studies of similar products or services, information on the direct competition and their growth helps paint a more accurate picture of what a potential return on investment could be. It is also essential to add the investment amount you are looking at and what you stand to achieve from this.
A sales pitch can make or break your deal, and it is beneficial to get professional help in developing it.
6. Build your website
Just as you do your research, your investor too will do their homework before meeting you. It is essential, in the digital age, to have a website up and running. It does not matter if you do not have your product in hand. A website with information about the founders, the vision, what consumers can expect soon, should be easily accessible to your investor.
7. Seek assistance from a financial advisor
It can be challenging to forecast hidden costs, and every business has a unique set of needs to run a successful business. Financial advisors can help you identify the right kind of investor for your current stage of business, the terms of the deal and balancing expectations, risks and responsibilities for everyone involved.
It is worth representing your business at networking events, even if you are not seeking an investor. By developing good relationships with Angel investors and VCs, you already have your foot in the door when you need to raise capital in the future.
Getting funded is not easy. Multiple start-ups are competing with you to get the attention of an investor. In this case, it is your story and your sales pitch that sets you apart.
At App Boxer, we’ve helped many Founders like you to develop a brand, sales pitch and website. Reach out to our expert team for a free consultation tailored to your business and its needs.