The startup world is littered with stories of entrepreneurs who had their dreams crushed by investors who said no, by competitors who unfairly took advantage of them, or simply by bad luck and circumstance. This can be disheartening and frustrating, but it’s important to remember that it doesn’t have to be this way for you! The truth is that there are plenty of ways to improve your chances of finding an investor and getting your idea off the ground—if you know what you’re doing. Follow these tips, and you’ll find yourself on the road to success in no time!
First, What Is an Investor?
In terms of business, an investor is anyone who provides funding for your venture in exchange for partial ownership. When it comes time to raise capital, you can approach angel investors or venture capitalists (VCs). Angel investors typically provide a smaller amount than VCs and will likely have more hands-on input into your company’s day-to-day operations. For example, they may sit on your board of directors. Venture capitalists often have ties to larger investment funds and are usually less involved with your company.
Second, Why Should I Pitch An Investor?
There are two types of investors out there, angels and VCs. Both will expect you to be prepared for your meeting. It’s essential that you know why you’re selling them your business and what benefit they’ll receive from investing in it before meeting with an investor. Before we get into how to land investors, let’s look at when pitching makes sense and why. Is now a good time? What kind of business are you trying to build? Will an investment help it grow faster?
Third, Who Can I Pitch?
Unless you’re incredibly lucky, chances are you’ll need a business partner or co-founder in order to start your company. And that means finding people who believe in your idea and want to help shape it into a viable business. It also means pitching investors—who may not be as interested in your startup if they don’t know it will succeed.
Fourth, What Are The Components of a Fundable Business Plan?
Business plans generally break down into two different categories. A financial plan provides numbers and calculations that can show whether a business will be profitable. It often includes profit-and-loss statements, balance sheets, cash flow projections and other elements necessary for investors to determine whether a company is worth their money. The second type of plan is a strategic plan, which focuses more on day-to-day operational issues and internal business controls.
Fifth, Where Can I Find Funders?
Check your local business journal and online resources like Crunchbase. Consider attending conferences in your field or industry, they’re a great way to network and connect with potential investors. Reach out to people you know who have successfully raised money and see if they have any advice or contacts that can help you out too. And if you don’t know any other entrepreneurs personally, LinkedIn is a great resource for finding industry experts.
Sixth, Avoid These No-No’s When Pitching An Investor
Entrepreneurs often underestimate how much time and energy a fundraising trip requires. Just because you can fly down for a quick meeting, doesn’t mean you should. Pitching an investor is exhausting—but doing it right will pay off in spades later. There are several things that investors don’t like seeing when they meet with entrepreneurs: poor preparation, lack of documentation (business plan, market analysis), long-winded answers to questions and no real business model or financials behind an idea.