How to Get Investors for Your Startup and What to Consider
When you’re building your startup from the ground up, one of the essential foundations you’ll need to be thinking about is where you’re going to get investment, credit, and capital to fund your entrepreneurial venture.
You have a few options when it comes to investing: Bootstrapping and Startup Investment.
Bootstrapping is a popular way to start a business right now. What it really means is that an entrepreneur is starting a company with little capital while relying mostly on money outside the investments like funding a company from personal finances or the operating revenue of the said company. Bootstrapping is a great way to start a business while maintaining all of the control over your decisions but it also presents more risk for the entrepreneur than the startup investment would. The money can also be insufficient for a good start. However, it gives the business owners the opportunity to have a peace of mind and focus on things they really care about instead of working on returning a quick profit to investors.
Bootstrapping as an investment technique is quite simple - entrepreneur, or in some cases more than one, pull their personal savings, funds and so on and use them to start a business.
It's really popular right now because there is more focus on developing the business model and creating value rather than fundraising and earning money. Some of the companies that have successfully used bootstrapping as a way to start their business are Apple, Microsoft, GoPro, SPANX and so on, so it's a successful technique - especially because people want to invest in it later on.
However, getting an investment is still a better idea if you want to get started relatively quickly and get enough money for all of your needs.
Without ample funds, you’re not going to be able to invest in certain areas of your business, and you won’t be able to get it off the ground. You need to spend money in order to make money. Some of the most popular companies in the world were venture capital-backed like Facebook, WhatsApp, Ali Baba and so on. This can be a great way to start but trying to source investors for your idea is one of the most challenging obstacles you’ll come up against.
Today, we’re going to explore potential candidates that could be interested in your startup, so much so that they are willing to invest. We’re then going to explore why they would be interested, and why you should consider pitching your idea, ensuring your startup has the best chances of success.
First; Define Where You Are
The absolute first thing you’re going to need to do is to think about what stage of building your startup is in. This is so you know how to present yourself to a potential investor and understand what kind of investor would be attracted to your business opportunity.
Some investors will be happy to fund you based on an idea, even if you’ve got nothing set in stone. Others may like to see a prototype of your product, or case studies surrounding the service you plan to provide.
Collect this information first and gather all the resources you’ll need to pitch to an investor. The more prepared and organized you are during this stage, the more likely an investor is to take you seriously and provide you with the funding you need.
Now, let’s jump into what investors would be interested in your startup venture.
Reach Out To Investors In A Professional Manner
With a variety of means of communication, it might be a challenge to choose the best one. According to endless researches, email is the most professional and efficient type to reach out to investors and hold a conversation. And this is when the question “And how am I supposed to find email addresses?” comes into action.
The answer, as well as the solution, is pretty easy. You need an email finder tool that searches for addresses on the web. It can be either a browser extension, or a web app, or software. There are lots of them and you can choose the one which suits your needs and preferences. You can come across the best investor anywhere on the web. Which is why it is recommended to take advantage of web platforms that offer a variety of options of the same tool: i.e., web app and a browser extension. You can activate the instrument any time you need to. Quite easy and useful.
With such a tool at your armory, you will find an email address in a matter of minutes and send an investor’s pitch or ask for a bit of advice. Keep in mind: every professional is highly favorable to personalized messages as if it was created for him or her particularly.
How To persuade an Investor
Next, you should know how to persuade an investor. First off, you need to create a story. Storytelling will help you convince not only investors, but also users and future team members. Chris Sacca, a successful venture capitalist who has participated in Shark Tank for two seasons, claimed :"Good stories beat good spreadsheets.”
Secondly, investors love it when you have a great team - they believe in people and a strong team shows that you have leadership abilities. Another thing you should do is create a must-have solution. Find a gap in the market and fill it with an excellent option.
Network heavily for a soft sell - host and attend events, communicate with investors before you need anything. You can also obtain customers before you pitch to investors - get a few big names to sign up for the pilot or something similar.
A pitch deck is a presentation that entrepreneurs make when looking for investors. On average, a pitch deck should have no more than 19 slides for maximum effect. This is also one of the most difficult parts of getting funding - you have to say all the right things in your pitch deck in order to get funds and that's no easy feat.
It should be clear, simple, easy to act upon and above all, compelling. Here are the elements your pitch deck should include:
Problem - focus on one problem, one gap you are going to fill in the market.
Solution - it should be concise, clear and scalable.
Market - show a graph that depicts how the market advanced in the past and some predictions of how it will be in the future.
Product - this part is all about showing your product in action.
Traction - show the month to month growth if it's impressive; if not, leave it out.
Team - showcase your team and their previous achievements.
Competition - show your competitors and differentiate yourself from them.
Financial - show some of the future financial projections.
The amount being raised - it’s best to put a range from one amount to the other as a way to include all companies, even those who have a limit on their possible investment.
For one, create a list of suitable investors for your startup. Research what they want and need and start eliminating some of the investors based on your criteria. Another way to do this is to announce that you are looking for investors or simply being present in the community as a new and potentially profitable startup - blog about it, share on social media, get some attention.
One of the most important things - a tried and tested technique - is starting a conversation with investors before you even need the money, not when you are desperate for it. By starting the conversation sooner you'll have a warm lead to pitch to. This is far more effective than cold calling
You need to understand exactly how much money you need in order to pitch to a potential investor. However, knowing how much you need is only half the battle. You then need to find investors who are able to fund the amount you need.
Of course, you could take the approach of finding one investor to fund everything, or you could find multiple investors who provide smaller amounts, but whatever method you take, you need to make sure the people you’re spending your time with can afford what you’re asking.
They need to have the ability to fund you. If you’re not doing your research and they can’t, you’re wasting your time which is so valuable as a startup company.
Think About Your Immediate Network
When you’re starting a business idea, one of the first things you should be doing is telling your friends and family. However, within these circles of people, you may have people you know that are willing to invest in your idea and vision.
Searching for investors within your personal circles can be a great idea because there’s already the element of trust between the people you know and a relationship there, which makes it more likely you’ll be able to secure funding.
Of course, the amount you’ll be able to receive and the terms and conditions for the investment will vary depending on your personal situation, but make sure any interactions and investments are legally binding and agreements are set up to protect both parties.
Investors with Diverse Portfolios
If you’re going to look for traditional investors, you’re going to want to choose the investors who have a diverse range of investments made through their portfolio. Let’s say you own a technology startup where a technology investor is part of your business plan.
However, that investor has 40% of their investment fund in another tech-related company, and that company goes down south. You’ve now got the issue where the investor is less likely to invest in your company, and it can cause problems on you because they’ll be pressuring you to make their money back.
In short, try to diversify your investors and check out their portfolios to make sure they’re not all tied up in one venture that could cause problems for you in the future.
Looking for the Right Cultural Fit
To save any problems coming up down the road, you’re going to want to find an investor who has the same mindset and values as your startup company. For example, if you’re an eco-friendly fashion company, having an investor who’s only interested in making money and doesn’t have environmentally-friendly ethics won’t work well with your business.
When you’re in the process of negotiating with your potential investors, asking questions to see whether your visions and beliefs are in line is essential if you want a working and worthwhile partnership in the long-term.
In some cases, working with investors who have a similar mindset to you is even more important than the amount of money you’re going to receive from them. Since they will be investing, and depending on your personal agreements with the contracts, these investors will become your shareholders and may have a huge say in the direction of your company in the future.
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Seek Professional and Experienced Advice
Hussein Ahmed from Transpose once said; “Cold calls or emails asking investors to consider your startup generally come off as desperate. Instead, I prefer to seek out the advice from investors that I admire”.
It’s understandable you’ll want the money to fund your startup quickly, but as we’ve already stressed above, it’s important to make sure you’re getting the right investors for you. If you’re unsure on what you’re looking for or how you want to proceed, there’s no harm in asking a professional investor for their advice.
Ask for advice at first, rather than money. This way, you'll always be present in their minds and you'll involve them in your development process which will result in an easier path to getting funds later.
Using online searches, you can quickly find respected investors. Take the time to listen to their interviews and read their blog posts for advice and information on what you should be doing and what you should be looking for.
If you have an investor in mind, remember there’s no rush to jump into a contract, but rather asking them for advice and then building up a relationship with them over time is a great way to build trust, iron out any potential issues or obstacles, and can create a partnership that’s built to last. Simply contact a few investors and ask for some professional advice - this involves them with your company and makes them pay attention to you while they also feel respected and admired.
Accelerate Your Startup
“If you’re a first-time startup owner, you might not have any connections that can help you to reach out and connect with potential investors. However, there are what are known as ‘startup accelerators’ that can help you along the way,” explains Sam Howard, a tech writer for Origin Writings.
These organizations exist depending on where you are in the world, or online, and can help to provide you with mentor programs, which is ideal if you want to learn how to deal with investors, and other opportunities that can boost your startup.
Of course, there’s no guarantee that you’ll get an investment out of it but joining and partaking in one of these programs is a great way to boost your knowledge and experience of the startup industry and will help new investors feel a lot more comfortable investing in your business.
Most importantly use that time to get a good team and a great confounded. When in the accelerator program, make sure that you listen and respond to criticism well, listen and open your mind to other people's opinion.
When applying, take the time to fill out the questionnaire and be prepared to give concise straight to the point answers in an interview. Describe the quality of your team since evaluators really care about that a lot. Explain your advantage over competitors, show your market opportunities and understand your customer.
As with any area of business, maintaining a solid channel of communication with your investors is vital to your success, especially when you’re a startup company. If you’re planning to follow up with your investor on something, you need to make sure you’re following up.
If you have a meeting scheduled, or you need to write an email or send them a file, then you need to make sure you’re doing as a priority. Of course, you’re busy and will have lots of things to do, but your investors will have taken a risk investing in your business, and it’s crucial that you build a trustworthy relationship with them.
“When you’re searching for investors, you need to make sure you’re showing this attitude clearly from the moment you meet and to make sure they’re doing the same. Work out which metrics you’re going to be dealing with, and even suggest a communication plan of weekly or monthly meetings,” shares Nick Delling, a business writer for 1Day2Write and WriteMYX.
This way, potential investors can know to trust you, and you know they’ll be there for you. An investor relationship is all about gaining and building trust and honesty.
Make Your Investor Requirements Public
When starting out looking for investors, most startup companies will go out of their way to track down investors that are suitable for them, but there’s no reason why investors won’t approach you while looking for investment opportunities.
However, the only way you’re going to be contacted by a potential investor is if you make it known that you’re looking for them. If they don’t know you exist, how are they going to make the call?
Even if your product or service isn’t ready, there’s no reason why you can’t start making your web presence known. You can do this by guest posting blogs onto websites, having Q&A sessions on platforms like Quora, or in other ways networking in the industry, perhaps by getting a slot on a podcast or web video show.
As you can see, there are plenty of things you’ll need to be thinking about when it comes to finding who wants to invest in your business and why. Make sure you bear all these considerations in mind to ensure you find the right investor for your company.
As a final takeaway, make sure you’re not rushing this process. It’s better to be organized, methodical and builds relationships over time than it is to jump at the first investor and have it all go wrong. Be focused and put your business at the core of the decisions you make.
Adelina Benson is an investment manager and blog writer at AcademicBrits.com. She develops how-to guides for startup businesses, provides mentoring opportunities and shares her passion for success.