A majority of budding entrepreneurs are optimistic, enthusiastic and passionate about their products or services. Unfortunately, investors may not share the same opinion about your “excellent” idea that is designed to change the world.
So, the process of preparing for investor meetings and raising funds to get your startup idea off the ground can be a challenging undertaking. Here are six things you need to do before you connect with potential investors.
1- Do Your Research
Since there are many potential angel investors or venture capitalists,
you need to do your homework extensively and investigate each of your
prospects. Before you close any deal or sign any documents, gather credible
leads, sort them out carefully and do your due diligence.
For instance, if you‘re looking for an investor in the field of
technology, you should target investors in tech-related areas. Working with an
established investor in the technology industry, such as Mark Stevens, who is the current managing partner of S-Cubed Capital, is a great way
to get started.
Don’t just contact any venture capitalist out there blindly, and expect
to get funding. Instead, you should apply some level of business-development
mentality so that the potential investors you contact can consider your idea.
An ideal investor should be an individual who has both the financial power and
technical knowledge in your product area and vertical markets.
If you manage to convince one investor to invest in your product, there
is a possibility that he/she may persuade others to consider making the same
move. Angel’s List is a great platform to find potential investors. However,
before you call or meet with any investor, scour the internet lengthily and
read everything you can about the investor.
2- Plan Strategically
There is a strategic planning process that you should follow when trying to raise capital for your startup. Some of the key components you should consider observing in your business plan include:
- Customer profile
- Product roadmap
- Target market
- Value proposition
- Future projections
- Key milestones
- Operating expenses
Once you understand these basics of your startup idea, it’s much easier
to raise outside money from venture capitalists.
3- Come Up With a Credible Business Plan
Coming up with a credible business plan is part and parcel of your
strategic-planning process. Your business plan should forecast your quarterly
financial model at least for the upcoming three years.
In order to truly understand your business’s potential and how to
describe it to potential investors, you need to get a detailed monthly
financial plan for at least the first 18 months. Getting your product right
involves being able to explain it crisply and clearly in terms of the
money-making strategies that you have in mind.
4- Come Up With Key Milestones
Although your startup idea may be stimulating, investors are often more
interested in the mind behind the concept. Investors will only give you their
money if they’re confident in your ability to deliver results.
Therefore, you must be able to identify measurable goals so that
potential investors can be convinced that you have the skills to realize the
big plans. After all, without a clear set of key milestones and objectives,
it’s impossible to argue your case before any credible investor.
The entire process of raising capital for your startup is likely to take up to six months. Hence, you should form near-term key milestones that you intend to achieve within the next few months. The small wins will encourage your investors to get involved in your business.
In terms of reducing risks, each of your milestones should be relevant
and realistic. You should know what your real milestones are and how to track
5- Describe the Problem Your Business Solves
Regardless of how amazing your startup business idea is, it must be able
to effectively solve a particular problem that your target audience is
struggling with. Describing the exact problems that your business idea hopes to
solve, is a highly effective strategy, especially for budding entrepreneurs in
the tech industry. It would help if you found a way of showing your potential
investors something tangible within the first five minutes.
6- Create a Convincing Pitch Deck And Presentation
You need to come up with a convincing pitch deck and investor
presentation when meeting with potential investors. A pitch deck describes the
imagery and text on your presentation slides. Your performance, on the other
hand, is what you’ll say and how you’ll say it.
Your pitch deck should clearly describe all the aspects of your business
idea and highlight the financial plans you have about spending and making
money. Therefore, you need to thoroughly scrutinize and develop your business
model and visualize it in your pitch.
Having a solid, realistic and achievable business
plan is a sure-fire way of getting funding for launching and running a startup.
When relying on investors to help you get started and make any meaningful
growth, you must be tactical in your pitches. While there are several ways of
raising capital for your startup, you need to evaluate your business
projections to avoid making mistakes that may derail your growth potential or