Updated: Apr 6
THE BENEFITS OF ENGAGING THE RIGHT INVESTOR
Finding, impressing, and closing the right investor can help you on your entrepreneurial journey, both financially and personally.
A good investor may assist a new entrepreneur with guidance, advice, industry connections, and credibility. After all, they're not only betting on your venture but also you and your capabilities.
By conducting research, perfecting your pitch, expressing the value of your product, and being precise about your intentions and goals, you can attract the ideal investor and help your firm take off.
To improve the fundraising process, you must first select the type of investor that is a good fit for you and your venture.
There are various ways for financing a venture, including the following:
Small Business Administration (SBA) Loan: Applying for a bank loan that you will be required to repay with interest
Crowdfunding: The process of collecting funds utilizing platforms such as Kickstarter or Indiegogo in exchange for eventual access to a product
Self-funding: Deployment of funds from your savings or retirement account
Venture capitalists or Angel investors: Collecting funds from a corporate or individual investor in exchange for a share in the business on mutually agreeable conditions
Although Angel investors and Venture Capitalists are the two popular types of investors to finance a business, they can be difficult to navigate.
A Venture Capital (VC) firm utilizes the funds of individual, institutional, or corporate investors (referred to as limited partners) and invests them strategically in businesses. General partners or venture capitalists are the individuals who oversee the funds.
Angel investors, alternatively referred to as angels, are individuals who invest in businesses with their personal funds rather than as limited partners in a venture capital firm. While angel investors often invest less money than venture capital firms, they are known for taking higher risks on early-stage startups.
Regardless of the type of investor you want, conduct research on the organization or individual to see whether they appear to be a good fit. At the end of the day, each investor is unique. Because you'll be consenting to their terms, communicating with them during your organization's successes and failures, and giving them a stake in your business, you need to ensure they're someone you trust and would like to work with on a daily basis.
ESTABLISH YOUR ENTREPRENEURIAL OBJECTIVE
Prior to approaching prospective investors, carefully outline your entrepreneurial goals. Is it to generate a consistent income? To be bought out by a large corporation? To radically alter an industry and establish yourself as the "next great thing?"
Whatever your objectives, frame them in such a way that each potential investor can be seen as someone who can assist you in achieving them.
UTILIZE YOUR CONNECTIONS OR INVESTMENT NETWORKS
Leverage your professional network to identify potential investors. Investors are overwhelmed with pitches and requests from innumerable entrepreneurs; having a mutual connection makes all the difference and can attest to your and the investors' character. Alternatively, you may leverage investor networks such as InwestCo to maximize your exposure and connect with the right investors who are familiar with your industry and interested in diversifying their portfolios in your sector.
5 TIPS FOR CONVERSING WITH PROSPECTIVE INVESTORS
1. Create an Outstanding, Straightforward Pitch
Every second counts when you are speaking with prospective investors. Given that you're likely to be one of several entrepreneurs approaching them with proposals create a brief pitch that clearly describes your idea, its value, and why you require funding.
The circumstances determine the length of your pitch. If you're pitching investors in a formal presentation, the time limit will almost certainly be set for you, and it will likely be between three and fifteen minutes. Suppose you're meeting investors in a more casual situation, such as a networking event or a meeting with a reciprocal contact; it's prudent to prepare two lengths: one minute and three minutes.
This way, you can give a high-level overview of your business idea and then expand on it further if they're interested in continuing the conversation.
Practice presenting your pitch to friends and family members, as well as to strangers. If they are perplexed or require clarification, you can alter your pitch to make it as concise and compelling as possible before meeting with potential investors.
2. Narrate an Engaging Story
While measurements and statistics are critical for demonstrating the value of your product, providing investors with raw data may cause them to become disengaged and uninterested. By telling a captivating story that is backed by statistics, you can help them connect, relate, and develop a sense of personal investment in your product.
One story you have at your disposal is the origin of your product. Perhaps you encountered a problem or recognized an opportunity in the world that was not being handled by current market products and decided to design a solution. Perhaps there is a story about how your offering benefited an early customer.
Whichever story you choose to tell, be sure to paint a picture of the person, their problem, and how your product solved it. Your story can include the following factors:
Create a new market for an existing solution.
Find new resources that will allow the entrepreneur to create the goods cheaper.
Repurpose existing technologies or integrate solutions to produce an old product in a new way.
Create a new product using existing technologies or integrating solutions.
Finally, develop a new product using new technology.
3. Demonstrate the Need and Significance of your Product
Investors are in the business of locating underserved markets. When communicating with them, articulate the opportunity your idea addresses, the size and makeup of your audience, and what sets your product apart from competitors.
Another strategy to conceive the value of your product is to define the "Job" that customers "Employ" it to perform. Remember, customers do not simply purchase things; they employ them to perform tasks. For instance, a customer may employ a protein bar to keep them nourished while traveling, or a specific pair of running shoes to alleviate knee pain throughout long runs.
Your product may be employed for various tasks by a variety of different consumers. Defining those jobs can assist in communicating the value of your product.
4. Describe the intended use of the funds
It's critical to be candid about the amount of funds you're seeking and the purposes for which it will be used. Investors are eager to know how their funds will be utilized to grow your firm and result in a return on their investment before they commit.
Their financing may help you conduct additional hypothesis tests, hire essential staffers, or purchase raw material for large-scale manufacturing of your product.
You should provide them with as much detail as possible regarding the positive impact their financing could have on your ventures' success.
5. Emphasize the Investor's Distinctive Appeal
Finally, be explicit about why you reached this specific investor. Perhaps they specialize in a particular industry or stage of business, or they support Asian American & Pacific Islander, Black, Latinx, Female, or LGBTQ+ founders. Perhaps you have an affinity for a company they have previously invested in or like their track record of successful investments. Conduct research on them before meeting to ascertain these factors.
Whatever your motivations, demonstrate why you believe they would be a perfect fit and how their investment would benefit you particularly, as opposed to someone else's.