Attracting Investors for your Startup
At each stage of its life cycle, a startup needs funding. No matter how great the idea is, its implementation requires certain resources, both financial and material. Thus, each startup gets to thinking how and where they can attract such resources. So, let’s see what startups need and what they can do to get it.
To begin with, each startup should decide what do they need more to get their business off the ground – money or assistance and support? Or both?
More than the business model, investors invest in the entrepreneur, his passion, his risk appetite and a solid team backing the idea. They prefer investing in a B+ plan with an A+ team rather than an A+ plan with a B+ team.
Get Your Idea Validated
If an entrepreneur is able to translate his/her idea into a customer proposition – customers are ready to pay for that idea or product, then investors are always ready to invest. This can happen by business getting incubated where entrepreneurs get support system of mentors for translating their idea into a proof of concept. After this, the hope of raising money increases.
Business plan only gives investors the idea of entrepreneurs’ financial competencies. However, investors do not look at your business plan, the weightage to that is very low. The most important aspect is the conviction and persistence an entrepreneur demonstrates to execute that business plan.
Have a Large Risk Appetite
What is your capability of taking risks at all levels of business is one of the elements that investors need to understand from you. It means an investor will like to know whether you have thought about every possible risk that you could come across in the future and have a solution for that.
Get a Team More Competent Than You
If you can have around three-four people with you who are convinced of your business model and if you can get a co-founder along with you, the investors’ conviction to invest in you increases. Moreover, in order to implement the idea, an entrepreneur needs a cohesive team with complete clarity in terms of leadership within the team.
Get Proper Valuation
Raising capital means equity dilution that depends on the valuation that you get from the investor. It is important to arrive at a balance between the valuation you seek and the valuation given by the investor because too much equity dilution will make capital raising more difficult in the future as you will have lesser stake in your own company to dilute.
Keep in touch with Investors to gain traction
Don’t rush to investors only when you are in desperate need of funds, instead, have a close eye on who is the potential investor and reach them for suggestions, ask them to mentor you, and try to establish a long-term relationship with them. In this journey show them the potential of your product and attract them to invest in your business.
Have a clear ROI pitch
Hundreds of startups reach us every month for funding, surprisingly not even 1% of them are clear on what they want? they look very confused and has no clarity on what amount of fund they actually require, how many shares they want to dilute and how to use the newly wired funds. investors are least interested in those who fail to have a clear ROI.
You should be able to tell the investors what you are looking for exactly, what percentage of share you are going to offer, how will they be paid back and how much X times his money will grow over a period a time. Do strong homework in creating a “WOW ROI”, because investors love entrepreneurs who talk with data.