Should you start pitching potential investors with the business idea directly, or should you plan out customers’ attraction strategy first? Do investors seek convincing business results before investing, or do they invest directly without any proof? Well, there are many of such “who came first, egg or hen-type of questions” when you are about to start a new business. The vagueness of the startup funding often puts your thoughts & confidence in confusion. Best application idea >>>> any other efforts put behind to attract investors is a false statement. Yes, if you, too, were in the same thoughts that angel investors or venture capitalists need only a smart investor pitch, you are mistaken. Here is what you should be doing to attract investors to a startup.
It is easy to say that you need a pocketful of cash to launch your business, but it takes heaven and earth to bring the pocketful of cash into the account.
“Smart tech investors think about: a) future product roadmap, b) bottoms-up market size & growth, c) talent and skill of the team. Essentially you are valuing things that have not yet happened and the likelihood of the CEO and team being able to make them happen. Finance people find this appalling, but investors who do this well can make a lot of money.” Marc Andreessen shares investment tips on Twitter
App development lifecycle needs funding at each stage of development. From acquiring resources to purchasing materials, startuppers have to convince investors about the business idea’s success. So here are the preliminary steps that would help you open the floodgates of investor opportunities.
#1 Add a purpose that signifies why you want to make money and what will you do with the money:
It is better to add a motive behind making money. The real purpose of earning money can be anything of your personal interest, like revolutionizing the healthcare industry or contributing to the environment or saving the wildlife, protecting forests, marines….. Anything.
The thoughts and the ideas behind the concept may help you convince the investors better. Who knows, they might share the same views and would gladly give away the fundings.
Well, a shoe company named TOMS Shoes successfully grabbed funding in the seed round and built a $400M business. Their purpose pitch to the investors was to give a free pair of shoes to the underprivileged whenever a pair of shoes is sold.
#2 Spread the word in your network:
Word of mouth marketing may seem a thing of the past, but it is still the most powerful thing you can ever do. Start talking about your business idea in your network. If you are associated with any community or a networking platform, you should start connecting with the local investors. By doing this activity, you will give your business a chance to grow organically.
Often referred to as organic soft-sell, you can drive local investors, which can further help you craft a solid investment pitch.
#3 Personalize your startup idea with a story:
Just like adding a purpose to the mobile app idea may change the perspective of the investors, a personal story or a visionary thought aid in getting funds.
You should let your investors know where the idea originated from and what provoked you to try this business idea over others.
Remember, Facebook preliminary investors were extremely impressed with the campaign run by Mark Zuckerberg on eating only meat to support sustainable farming.
#4 Try gathering customer references:
This might seem like a bullet in the air, but you will need to have a few customers who have used your product. Investors would find it more reliable to invest in a business idea where customers are happy with the results. A transparent conversation with the customers will help investors gain knowledge about your business. Additionally, the convincing number of customers would reassure that the business idea will succeed when it is launched in the real market.
#5 Show them an attractive Return On Investment:
Business is all about making money. As much interested as you are in making money, so are the investors. It is important for you to show them what they will gain by making an investment with you.
Investors should feel out of risk before they invest and hence, clarify their return.
#6 Clarify the Cap table and, if required, explain your financial statements:
A capitalization table, aka Cap table, clarifies the details about the liquid amount, debts (if any), equity shares, etc. The document covers various investors’ and money lender’s details.
If you approach an investor with a transparent Cap table, it will assure them about the money utilization strategy and build up trust.
Financial statements are very personal because it opens up how you operate the business. Financial statements will help investors understand the cash flow and profitability of the business. They can rest assured that there are no debt obligations that can put the business in jeopardy.
#7 Exhibit firmness and resilience in the business plan:
The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.”- Nolan Bushnell
Your confidence in the business idea can do wonders in attracting investors to your business. However, a common startup funding challenge is to convince the investors what you would be doing if your business idea doesn’t perform as expected.
Show them that you are ready to pivot the business if required, and you have your “Plan B” ready with you.
The whole motive behind communicating personalized things to the audience is to let them know your personal interest and how innovative you are.
#8 Define your team, especially let them know who your cofounder is:
“The secret to successful hiring is this: look for the people who want to change the world.” –Marc Benioff, Salesforce CEO
Investors are interested in exploring who they are doing business with. Knowing about your product or service is obvious, but knowing about the team or co-founder’s name is also a thing in today’s time.
Investors find it more appealing to know that the business is in the right hands and guided by a professional having a knack for business.
A piece of quick advice: If you are unable to find a smart co-founder, do not be in a hurry to bring anyone.
#9 Seek funds from the online fundraising market:
Online platforms offer a huge scale of opportunities. You shouldn’t limit yourself to physical meets and funding rounds; instead, participate in online funding events. You can utilize fundraising platforms like AngelList, Gust, or CircleUp and raise fundings for your startups.
#10 Showcase the sales pipeline:
Sales figures are lucrative; I would say highly lucrative. You should collect data that shows how many customers are eagerly waiting for your product or service. You should define your USP and how you plan to stand out from the competition. USP shares the way in which you are planning to solve a problem uniquely.
If you have launched your product into the market, show investors the sales number you have achieved and how many customers are in the sales funnel.
Final Thoughts:
“It’s almost always harder to raise capital than you thought it would be, and it always takes longer. So plan for that.” –Richard Harroch, Venture Capitalist and Author
Investors not only lookout for a smart and innovative business idea, but they also want a reliable partnership. All of these things mentioned above are likely to solve your query related to “how to attract potential investors”. We hope this blog has laid the groundwork for attracting investors. If you still have any questions, feel free to inbox us, and we will get back to you in the quickest possible time.