Launching a business typically requires access to considerable capital. Unfortunately, not many entrepreneurs have the money they require to put their plans into action. No matter whether you’re looking for seed money or for capital to expand your business, you may seek funding through different types of investors. However, you need to know what investors look for before investing well in advance.
What Do Investors Look For?
Aspects that investors look for before investing include:
- Unique ideas. You need to highlight how your product stands out and how it solves a unique problem. Alternatively, you need to demonstrate how your product comes with a distinct competitive edge.
- Numbers. If you’ve been in business for a while, show possible investors how your company has performed so far. If you’re yet to begin operations, provide details about when you plan to hit your goal and when investors might start expecting returns.
- Business plan. You should have a data-driven business plan that touches upon areas such as intended markets, marketing plans, competitor analysis, potential obstacles, and projected timelines. Your business plan also needs to demonstrate business readiness.
- Narrative. A strong opening narrative sets the base for drawing in possible investors. Oftentimes, what sets one entrepreneur looking for funding apart from another is a strong narrative.
- Investment structure. Determine if you’re looking for shareholders or partners to come up with a clear investment structure. This usually involves creating a stockholder agreement that clearly defines the rights of all owners.
What You Need to Do Before Looking for Investors
Investors are in the game to make money and your task is to show them why you’re a good bet. Doing your homework before looking for investors increases the possibility of success. While approaching just about anyone who might have money to spare may seem like a good idea, applying a business development mentality tends to bear more fruit. This would involve qualifying your leads first.
Rely on Strategic Planning
You need to have a clear idea about your unique value proposition, customer profile, the size of your target market, potential for growth, and existing competition. You should have a clear roadmap showing where you plan to reach in the next one, two, and three years. Determine how much money you stand to make after accounting for all the costs you might incur.
Create a Financial Model
Your strategic business plan needs to offer quarterly financial forecasts to cover for the next three to five years. Come up with a detailed monthly plan for 12 to 18 months. Then, prepare to explain any financial-related aspect to possible investors.
Formulate Important Milestones
Establish relevant short-term milestones you wish to achieve in the coming months – be it raising seed or venture capital. Achieving those goals helps build confidence among possible investors.
Focus on the Pitch Deck
Coming up with a solid investor presentation and a great pitch deck can help you win half the battle. While the presentation focuses on how you translate your thoughts into words, the pitch deck focuses on the textual and multimedia content that you use during the presentation. Both should revolve around the story you wish to convey and highlight key aspects of your business.
Looking for investors should happen only when you have a firm business plan in place. You need to craft a story to highlight the problem that your product will solve, craft an executive summary that garners interest in your business, and focus on pitching your idea to the right investors in the right manner. If you feel you need help at any step of the way, consider contacting a consultant who specializes in connecting entrepreneurs with investors.