How To Make Investors Chase Your Startup (And Not The Other Way Around)
In the world of startups, investors are sometimes revered as angel-like figures that swoop in from the heavens to offer a helping hand to businesses in need.
While young, bright-eyed entrepreneurs are justified in feeling this way, in reality, investment is a business arrangement like any other. Both sides are in it because they see a possibility for greater returns down the line, if they work together. However, since there are more startups around than investors, the former have to convince the latter that they are worth putting money on the line for.
But is there a way to reverse the situation? Can startups take the initiative, and have investors lining up to offer financial support? We believe that this is the case. With a bit of creativity, planning and dedication, a startup can make the prospect of investing in it irresistible for investors. To find out how to make your startup more appealing to private equities, angel investors and venture capitalists alike, take a look at the guide which we provided in the rest of this article.
Propose a Bold Business Plan
Common wisdom dictates that your business plan should be safe and predictable, so as not to scare away potential investors. The only problem is, following conventional wisdom is a terrible way to set yourself apart from other startup companies which are doing the same. Instead, what you want to do is present a riskier, more ambitious plan, with a greater potential for return on investment. Investors provide financial support to multiple projects at a time, so they can afford to back a couple of riskier projects, provided the potential for gain is high enough. That is not to say that your plan should be divorced from reality for the sake of impressing people. Be realistic about your chances for success, but don't shy away from proposing something risky.
Show Market Research
In contrast to your business plan, the market research it is based on should be rock-solid if you want to attract investors. Market conditions are in a constant state of flux, but there are still facts and regularities which can reliably determine whether a business is likely to fail or prosper. These include the existence and structure of your target demographic, the availability of similar products or services, potential competitors in the field, expected revenues for similar-sized companies, etc. Create a PowerPoint presentation out of your data, and print out a paper version to pass around to potential investors. This will give them something substantial to go on while deciding whether to support your venture or not.
Be Transparent About Finance
If you are asking for money from someone, you first need to prove that you know how to handle it. The same holds true for the relationship between startups and financiers. At the bare minimum, be crystal clear about how much investment you will need to realize your company goals, where the money will go, and what kind of return on investment can be expected. Add another layer of credibility by offering to add a clause about voluntary liquidation to the investment contract. This will show investors that you are prepared to offer compensation in case things go wrong.
Introduce Your Team
Some investors will judge a project primarily based on the names attached. Their logic is sound, as it relies on the notion that the right individuals can turn any project into a success. And if there is one thing that startups can reliably muster, it is talented people. So in order to catch the eye of investors, be sure to present your team in the best possible light. Give each team member a chance to introduce himself, in whatever format they find comfortable. Have them talk about their previous work experience, the reasons they came aboard in the first place, and what their thoughts are on the work they do.
Give a Demonstration
Words will only get you so far in the world of startups. To really catch the investors' attention, you need to be able to provide something a bit more concrete. If your company is trying to create and sell a product, presenting a prototype with core features will put you ahead of many startups. If you are providing a service, try to show how it works in practice on a limited scale. This is especially important for software startups. The sooner you provide some tangible bit of evidence that what you are offering is real, the faster will investors get on board with your idea.
Competition for investment funds can quite fierce in the realm of startups. Setting your self apart can be quite a challenge, but if you use the methods which we have outlined above, your odds at attracting investors will rise dramatically. Remember that as much as you need their money right now, the tables can easily be turned once your project gets off the ground.
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