The Search For Startup Investors
Getting a startup off the ground is a pricey task, not usually affordable out of pocket. Even keeping a business going through the upheavals of Covid and supply chain pressures is more costly than ever before. Most entrepreneurs at some point may need to consider outside funding. Borrowing from family or a traditional lender may not be the best answer for some. The SBA has really great resources for small businesses, but if that’s not enough, then exploring the world of investors might be key to getting your company to the heights it wants to go. Better than chasing capital, let it come to you by demonstrating what investors are looking for. Prepare yourself a solid plan and sound presentation to be a shoe-in before even making a pitch.
When you do go in for the kill, show them the money. At the end of the day, no matter how much a prospective investor may want to support you, they are there for profit. If you’re an established company, use your glowing records as a talking point. Demonstrate you know how to bring in gains by making smart choices with expenditures, beyond having a reliable product. If you’re a new startup, have a clear plan on how you intend to grow and bring returns. If the records are less than glowing, explain how more capital can solve this.
Understand where your investor is coming from, what types of investments drive them, and how they make their investment decisions. Once they’ve established the profit potential of a business, their other motivators are likely to be more subjective. Whether they choose a project based purely on the numbers they see on paper, or if they decide on instincts, they’re still choosing to invest in you and what you do. Have a compelling story and mission statement. Show what distinguishes you in your field or how you innovate. What problems can you solve?
Is your vision ready to go? Once you’ve mapped out your plan to success, do you have your key pieces in place to get business rolling and if not, what’s your next action? Have you sorted out your intended corporate structure? Are you seeking a partner or to sell off small percentages? What are your expected terms for ownership, rights, and obligations? Are you prepared to negotiate? Do you have a strategy for possible amendments to those terms like sell-offs, closures, changes to the company, or value over time? Do you have a clear valuation for your business? This will be the time to consult a good lawyer, and again, the SBA.
The idea is to be hyper organized and prepared, but remain human and relatable. If you’re at the point where you’re exploring investors then your company should already have catchy branding and a decent following; it’s assumed you’ve found a niche that sets you apart and gets attention. Even if you’re just a humble mom and pop with a common product, if you have a smart proposal and a notoriously good reputation, then build your presentation on that.
Now take all the data you’ve acquired about your business and condense it to present in a simple package. Add a request letter which includes the reasons you need funding, what you will spend it on, how it will generate increased profit, and when to expect returns. Spend some time to compose that compelling story of how your business came to exist. Why you do what you do, who you are, and if you have a team of power players taking the journey with you, describe them too. Let your business sell itself before you even arrive to make your pitch.