You’ve got a great product idea for a business. You’re passionate about it, and you know it has the potential to change the world.
But the question arises: how do you attract investors for your startup?Â
Venture capitalists, angel investors, and bankers are always looking for the next big thing, but it’s not always easy to pique any investor interest.
If you’re looking for ways to take your new business off the ground, here are tips on how to attract investors:
1. Develop a solid business plan
If there is one thing that investors love, it’s a solid business plan.
Business ideas don’t materialize on their own. Think of any big-time companies out there today. All of them had come from serious business planning. Of course, yours is no exception!
This document may not automatically attract investors, but it definitely increases your chance of getting the funding that you need. It should outline your:
Business idea
The first section of your plan includes introducing your idea with a bang. Make it clear what your business is all about and why it’s different from the rest. This will help you get investors interested from the start.
Market landscape
All industries have competition, and the catch is how you stand out. This section provides thorough market research and analysis of the market landscape. This will help your potential investor understand where your business fits in and how you can make it grow.
Target customers
To whom are you selling your product or service? Demonstrating your market demand is also critical in understanding the potential success of your business. Consider providing investors with specific demographics or, better yet, a first-hand customer review of your product or service.
Sales and marketing strategy
What’s your budget for marketing? How will you generate leads and conversions? These are important questions to answer in your marketing plan as they will show potential investors that you have effective strategies for getting the attention of your customers.
Financial projections
Create cash flow projections for the next three to five years. Past financial statements will also show potential investors that you have a handle on your finances and that you’re planning for the growth potential of your startup.
Project roadmap
Finally, don’t forget to include a timeline of your project milestones. This section of your plan provides investors with the progress and how you plan to achieve your goals in a span of time.
[Also read: Business Startup Checklist: The 12 Essentials for Establishing Your Company]
2. Have a compelling story
Your company might have the best product or service in the world—but if you can’t tell a compelling story about it, good luck with attracting investors.
Aside from having the technical requirements for the startup process, translating your passion into a story that can convince investors to fund it is another thing you should think about.
How will you do that?
- Share personal stories
- Create an emotional connection
- Paint them a picture of the future of your company
Dropbox, for instance, was introduced by Drew Houston as a product that would solve problems when he forgot his flash drive when he was going to school. He provided investors at Y Combinator with this experience and was soon funded to become an MVP (minimum viable product). Years later, it became one of the most popular cloud-based file storage companies in the world!
These are not new ways to approach the right investors, but it definitely works. As a business owner, you should remember that they are humans too, and they are not the type to take a hard sell from aspiring startups or even small businesses.
So, when pitching your great business, tell them why your product is important and why it’s needed in the marketplace. Personal stories can attract investors when they see that you have heart and passion for your business!
3. Think like potential investors
Whether you’re reaching out to venture capitalists or angel investors, you need to think like them.
If you were to invest money in a company, how would you find out if they have what it takes to be established in the industry? You ask them tough questions.
From your business model to your target market, you need to be able to answer everything with confidence. You should also be familiar with the investment process and what’s expected.
Some offer small initial funding injections, while others secure funding for later-stage expansion (Series, A example). What investors you seek depends mostly on how far you’ve grown your company and how much control you’re willing to give up.
Try these questions:
- What will your daily business operations look like?
- Are you ready to hire a team, and how will you delegate tasks?
- What are your thoughts on expanding your business in the future?
- What are the potential risks and challenges associated with your business?
- What is your exit strategy?
Investors want a well-thought-of business that has the potential to scale. So, when you’re preparing for your pitch, always think about how your company will grow in the future.
4. Ask for advice and learn tips
Attracting investors is not an easy feat. You will have to go through many rejections, but that’s okay. It’s part of the process of raising money, and it only makes you stronger.
One way to ease your journey is to ask for advice. Instead of begging them to invest in your business, you may ask them to give honest feedback on potential flaws with the way things are currently being handled.
Some may even give tips that may help hone investor relations and increase the chances of securing funding. Approach them early on or after your pitch to see what they may have to say about your company.
So, take every rejection as an investment opportunity to improve! You’ll never know what they may say that could help you along the way.
5. Try the organic soft-sell
Networking events and meetups are a great way to connect organically with investors. You never know whom you might run into, so it’s important to actively participate in the investing community.
Don’t go to these events with one goal in mind: finding an investor. Instead, try to cultivate strong relationships and connections that can help you along the way.
A little technique to do is soft-sell pitching.
A soft sell pitch is a low-pressure way to introduce your business idea to someone. You’re not asking them for money or anything of value. You’re simply sharing what you’re passionate about.
Here’s how you can start:
Attend a startup accelerator
Events are where you’ll find investors who are on the lookout for new ventures. So, keep track of the upcoming conferences in your area or even outside the city.
Prepare an elevator pitch
Investors are busy people, and they probably have a long line of eager startups who are just as desperate as you are. A 5-minute pitch is all you need to get their attention.
Keep in touch
After you’ve made that initial connection, don’t forget to keep in touch! Send potential investors an email or connect with them on their social media accounts. You never know when they might be ready to invest.
It may sound like a desperate move, but other entrepreneurs have done organic soft-selling. Most times, it works out for the best!
6. Have a great team
In today’s world, it’s not impossible to build a local startup on your own. Many may have done it in the past years. For instance, Stardew Valley was created by one person, and it was a huge success. But it’s not a feat that other professionals can do.
But, if you’re attracting investors, you need to show them that you have a great team behind you that is ready to take your business on the road. They want to see that you have the right people in the right places, working together to make your vision come to life.
At the core of your business, here are the roles you want to fill in:
- Co-founder
- Advisor
- Accountant
- Lawyer Officer
- HR Officer
By informing your investors about who is involved in your company, they’ll be secure knowing you can focus on doing essential business activities.
7. Be confident
We know that this is easier said than done. In a room of potential investors, you may feel like a small fish in a big pond. But if you don’t have confidence in your business plan, how do you expect others to?
Memorizing your business plan is not enough. You have to own it!
Show your investors that you believe in your business and its potential for further growth.
Use words like “will” and “can,” not “maybe” or “might.” Be firm with your answers but not arrogant. An investor knows when someone is pretending to be confident, so make sure that you’re genuine and sincere.
It’s also important to remember that rejection is not a reflection of your value as an entrepreneur. It’s just one investor’s opinion, and there are many more out there who may see the potential in what you’re offering.
Bonus Tip: Attract Investors by Wearing a Suit!
If you want to represent your business well, wear your best suit! It gives off the impression that you’re professional and that you’re taking your business seriously.
Pair it with a persuasive presentation, a proven track record, and a great business partner by your side, and you’re one step closer to getting funded!
Let’s Develop Your MVP!
The right investor can make all the difference for your start up business. But how can you show them that there will be a great return on their investment?
Let’s work together to create an MVP! An MVP will provide investors with a glimpse of your product or service and how it works in the real world. By having a working prototype, you’ll increase your chances of finding people who want to invest!
StarTechUP can be the first investment to grow your business. We offer consultations that will help you validate your product, get feedback from customers, and generate revenue. With an MVP in hand, you’ll be able to show potential investors.
Don’t miss your chance to get funded! Contact us today and see business results.
