Top 5 Important Tips for Start-Ups to Attract Investors
If you have a promising and profitable business that needs capital to grow, then seeking out potential investors may be the right route for you to take. You don’t have to let your ideas die because there is no money to make it come to life.
Investors are known to be valuable resources that can provide capital and the best of ideas to revamp start-ups of any size. But finding the right investors for your business can be stressful and time consuming.
So what can you do to attract the right kind of investors that will help fund your business? How do you convince potential investors to believe in your products? Here you’ll find five great tips that will help you attract investors who will help fund your startups.
1. Be an Expert in Your Field
If you really want to attract investors that will take your business to another level, then make sure you know more than enough in your field. Go above what you should know in order not to sound stupid when faced with professionals pertaining to your business.
Remember that most investors who will come to you already know everything about your business. Investors will come to you with all sorts of questions to test if you’re knowledgeable enough not to gamble with their money. So in order not to misrepresent your business, the best thing you can do is to take time to acquire more valuable knowledge about your business and industry.
Go far from the basics so as to encourage your investors to have confidence in partnering with you. No one will likely fund an amateur who doesn’t have adequate knowledge in his or her field.
2. Be Accessible
Don’t make it so hard for investors to communicate with you…this will simply piss them off. There are various methods and platforms you can use for communication, but make sure you’re available, and they know how to reach you. Making your phone number available to your investors is the easiest way for them to reach you. (Keep in mind, you’ll need to determine just how much access you give to Limited Partners, Minority Shareholders, etc., but for those big investors helping launch your start-up, you better be ready to take their call!)
You can get a separate phone number for investor communications, but be quick to answer whenever they call. From your quick response they’ll know that the business you’re seeking to fund is very important to you. Even when they reach out to you via email, make sure you reply as quickly as possible. Most importantly, weigh and review your messages before sending to avoid any error.
3. Prepare a Simple Business Plan
Presenting a concise, yet professional business plan is one of the very best tools to employ to attract investors. A well-crafted business plan, with a powerful Executive Summary, should be able to grab an investor’s interest, and impress enough to ask for more information. Be sure your business plan is simple and straightforward.
Don’t make it hard for investors to understand your business concept and how it will help them make money. Set clear goals in order to capture their interest and push them to action. State in the business plan why investing in your business is a good venture. Let them see your financial projections (and historicals, if you have any), including projected investor returns (ROI, IRR, COC, etc.).
Investors want their hard earned money to work for them, and giving them realistic projections that make them healthy returns is a sure way to get them onboard. Your business plan should include Costs of Goods for your products, Payroll, information on your customer base, details on how your business will make money, whether it is a scalable business, and how long it will take to launch your product to the market.
Be sure you know your financials, and the details of your operations because your investors will have very likely thoroughly researched your industry before looking at your presentation. And most importantly, include a plan for growth. They’ll want to know if your business has the capacity for expansion in the next two to four years.
If you can’t write a solid business plan then hire a business mentor who can guide you; and capitalize on seasoned consultants who know your industry.
4. Less Networking, More Relationship Building
The power of a “network” in attracting investors and clients to a business cannot be overstated. The traditional approach for most leaders and entrepreneurs at a “networking event” is usually, however, a colossal waste of time. Most of these events are simply a game of “Who Can Collect The Most Cards,” rather than providing a forum or an opportunity to truly build meaningful relationships. Remember this: we do business with, and invest in, people not companies.
Networking is the first step to building relationships with connectors (those who know potential investors) and investors. Once people know you (not the other way around), you can easily attract potential interested investors to your business. Some networking organizations have platforms that connect investors and start-up entrepreneurs.
You can also conduct deep online searches for organizations that are specifically designed for investors, and contact the ones that have knowledge of your business. Before you contact any investor, however, be sure that you have written a convincing and detailed business plan.
Social media is another great platform you can use to find investors. LinkedIn is the perfect network you can start with due to the way it connects professionals in various industries. Build an honest and compelling profile, and clearly state that you need investors for your business.
There are also investor forums and groups on LinkedIn you can review and to whom you can make presentations. Don’t neglect basic internet searches for PEGs and PIGs (private equity groups and private investor groups)…some like to focus on industry specific investments, while others like to mix it up to spread their members’ investments across various industries. You can also search for investors on Twitter, Facebook, Instagram and the rest of the other major social networks.
5. Show Commitment, Tenacity and Passion
Be ready to exhibit commitment and passion for your business if you really want your investors to take you seriously. There is no way you can expect someone to invest in your business when you, the owner/founder have not invested in it. You better have some “skin in the game.”
Be ready to prove your level of commitment and passion to the project. This will attract advisors and team members, and define your business culture which will increase your chances of attracting investors. Any business where the founder has proven their commitment and expressed their passion for their mission, will always prove attractive to some investors, even if that business is not making money. So, be ready to demonstrate passion for your business to gain investors’ trust.
If you’ve hit a road block in finding investors, apply these tips, make some course corrections, and try again.
Have any of these tips helped you attract investors? What tips have you used to successfully attract investor capital to your start-up? Tell me about it below.