Finance is the lifeblood of industry. Every business, no matter its scale, needs money to run and expand its operations. Finding funding is a daunting challenge for smaller enterprises, particularly start-ups. This is why the importance of investors cannot be understated. It usually takes a lot of capital market scrutiny to zero in on prospective investors. It also takes a unique set of networking skills to not only approach investors, but to approach them the correct way and through a proper channel so as to improve your chances at getting them to invest in your business endeavor or idea. Angel investors, who usually invest in startups in which they see potential, are particularly difficult to convince.
Before you try to form strategies on how to convince your potential investors, you should first study in depth what investors look for while they are looking to put their capital in any enterprise. This will help you pitch your idea in an effective way, so that it fulfills the investor’s requirements as well as yours. In fact, the entire process of fund-raising, whether from VCs, banks or angel investors, takes a lot of time, hard work and an infinite amount of patience.
Do your homework thoroughly
Investors like to deal with entrepreneurs who are well-prepared before they come to meet them. You need to be thoroughly well-versed with not just your own company and product, but also be fully informed about your investors. You should have studied their past investments and the results thereof. It is good to have an idea of the industries they usually invest in and see if the investments made by them follow a certain trend and/or have some characteristics in common. This will help you link your product, idea or enterprise with their past investments, and make them feel that they will be on familiar territory if they invest in your business. Like you and your company, they want to grow their investments as well, whether in scale or market territory. Therefore, you need to ensure that you couch your proposal in a way that it demonstrates growth prospects for your investors.
Be prepared to answer any questions. Usually entrepreneurs running a small or medium-sized business, especially start-ups, are highly enthusiastic and passionate about their product concept, business idea or the particular project for which they need funding. As a result, they get so carried away that they overload potential investors with too many specifics and unnecessary details, thereby killing the investors’ interest their endeavor. Keep in mind that your potential investors may not have the qualifications, experience or knowledge required to understand the intricacies of your company or product. Nor will they be interested in going through the minutest workings of your company or product at this point. Just a gist or a balanced brief proposal would be enough to get them interested.
Show them proof
No matter how awesome you think your idea is, or your company’s products are, investors need tangible proof. They need proof of how well your company is doing in terms of absolute figures and performance metrics. If your project or product has had an encouraging pilot run, share the results with your potential investors. If not, then share the results, your analysis of the issues diagnosed during the course of the test run and how you intend to resolve these issues so that the actual launch in the market is successful. Show them your company’s past and present financial statements, revenue forecasts, profit projections, potential margin forecasts and performance metrics. Also, show them proof of your competitive advantage such as patents for a new unique products or trademarks and copyrights. A lot of this information can be highly confidential, so take care to securely store and share critical and sensitive corporate data. The basic idea here is to be precise and to the point while also backing your prep talks with cold, hard facts and figures, rather than plunging into an enthusiastic but vague talk about how your product will change lives or more.
Take criticism constructively, and rejection gracefully
Often investors may not see things like the market situation, profit projections or your product’s viability as you intend to present to them. They may even criticize or negate your ideas. They may have concerns regarding issues that might not even have occurred to you, catching you unawares. In such cases, take complete responsibility and request some time to come back with the answers. Promise to address each of their concerns to their satisfaction. It is important to be calm and listen carefully to criticism in order to convince them later with your answers to each of their points.
Sometimes, despite your best efforts, you will still face rejection. If this happens, learn to take “no’ in stride. A rejection doesn’t mean your idea or product will fail. It simply means that the particular investor wasn’t the right fit for your project. Simply move on to the next investor and think of the best ways to impress them!