There are right ways and wrong ways to go about developing a strategy to attract the right investors into your startup enterprise. And there are definitely more than a few that should top your list.
Follow these 7 tips and you’ll soon have to start turning investors away!
Get your outlook set right.
Your mindset must be prepared to stay the course and not be discouraged. Resolve that this is a process that will take time and perhaps extreme patience.
Everyone and their brother is out there trying to get a business funded. And, like you most of them aren’t lining up at the banks who they know’ll turn them down flat. They’re out pitching the same people you are. It takes time to stand out and find the right one.
Know how your company will impact the world.
Investors want to learn a lot about your company and future plans in as short a time possible. If your goals are anything less than fantastic, it’s time to change them. Private investors want to be part of a growing company. They aren’t like the banks who just want their money back with interest.
They want to make their money back in heaps, while also being a part of something spectacular. World changing even.
How are you going to change your industry? Mankind? The Earth? The universe?
Understand clearly what they’ll get back and how soon (money).
Of course money is the most important to most. Otherwise, they’d be called philanthropists rather than investors. Although they already know the fact that startups’ success rate is very slim (even the biggest ones failed miserably!) investors still need a firm schedule in place for the return of their money, or a set time when their equity will increase in valuation and become liquid.
For the big boys or those simply in it for the long-term, they’ll want to know how their money is being used and whether it’s moving the company toward sustainability or merely keeping it afloat for a spell longer. This is known as the internal rate of return (IRR) and it’s very important you can communicate this (convincingly) when you meet with these folks.
Train and assign specific roles to all team members.
Just because you’re running this startup doesn’t mean you’re the right man/woman to sit across from investors and pitch them. Even if you are the closer, maybe your team members can help you by assuming a role and playing an active part in securing the funding?
- Closers: Closers can do it all. They know how to read and talk to people most effectively, and are also great at nurturing ongoing relationships with investors.
- Middlers: Middlers are middle men. They go out and find the right investors and bring them to you.
- Relationship Managers: These people are like a closer on steroids when it comes to knowing what investors want to hear, when they want to hear it.
- Consultants (potential): These folks are the experts in all facets leading from conception to funding. This position requires more experience coming in – you won’t be able to train someone to suddenly become an expert in the field of startup fundraising.
Study your investor before approaching them.
Browse investor lists like CrunchBase’s huge list of 56K+ Investors, AngelList’s Investors List and Funding Note’s Business Funding Directory, and start analyzing. Get a firm grasp on what projects they’ve funded before and attempt to find out more about those they’ve passed on and why. Find out if they’re involved in more long-term business projects, or if they tend to give their money once, claim their reward (if any) and move on to something new.
This will help you formalize a pitch while also helping to decide if a specific investor is worth taking the time to woo or not.
Fundraising over expansion efforts.
No company can just pick single task for each day and expect to stay in business. However, at least until you get a much needed cash infusion, fundraising for your startup needs to be the priority in place of expansion for now.
Commit to securing that funding and give 100 percent, so you’ll be able to get back on the path to expansion more quickly. You could also hire a fundraising service to do this work for you if taking a break from expansion is a bad idea at this time.
Prepare to get creative.
This means going outside the norm. Outside yours and your company’s collective comfort zone to secure funding for the startup. You may have to blaze a new trail by putting all your time into aggressively networking trade shows, events, and even personal gatherings where investors can be found. Hone your pitch. Seriously. It’s critical to your funding success.
This isn’t easy by any means, but may prove more fruitful when you find that 24/7 money dispenser you and your partners are dreaming of.
Share Your Own Experience Finding Investors
What strategies have you found to be most effective at formulating a plan to secure investors?