If you run a startup company, chances are you’ve thought about chasing investment. After all, it’s the rich investors that bankroll Silicon Valley. All the new companies and promising startups are funded by the deep pockets of angel investors. If you’ve got your startup off the ground, and you need capital to take it to the next level, investment could help.
Before we get stuck into the main part of the article, ensure your business is ready to pitch to investors. Pitch too soon, and you might ruin your chance with the top investors. Make sure everything is in place first. Here’s how to convince them to part with their cash.
Show them the money
Most investors are only interested in the money. The want to see real and tangible returns on their investment. Make no mistake, your company will be one part of their bursting portfolio, and they expect returns. So, show them exactly how your business will generate revenue for them. And by ‘exactly’, we mean exactly. They want to know how your business is monetized, and when they can expect their first returns.
Tell them how you will use their investment
Angel investors got to where they are by being very cautious with their money. They certainly don’t throw it around. Investors like to know how you will spend their money, to the dollar. If you plan to use their investment for marketing, explain your marketing strategy. How will you divide up the money, and how will that benefit the company?
Any potential investor will want to take your business plan home. They’ll study it, and make their decision. Spend plenty of time perfecting your business plan, and honing it. Outline your mission statement and ten year goals. Dig into your market research, and identify your core target user. Investors want to see that you have understood your company from the ground up.
This is a controversial one for many entrepreneurs, but it’s a vital consideration. Most investors want to know your exit strategy. Many of them will invest in the hope that you sell the company for a huge profit in five-ten years. We know your business is your baby, but be open about a potential exit, and you’re more likely to get investors on board.
Elevator pitch and presentations
If you want to convince angels to invest, you’ll have to nail the elevator pitch. This is a quick (two minutes or less) intro to your business. This is what gets you in the door with investors. Once you’ve got a longer meeting, it’s your chance to sell yourself. We suggest working with a PowerPoint design agency to get your presentation just right. The stakes are too high to rely on your dodgy PowerPoint skills!
Again, this might go against your entrepreneurial instinct, but think medium-term. If you go into a meeting, don’t explain your plan for world-domination, and ask for $10 million. You’ll go home empty handed. Explain that you need $50,000 to expand your manufacturing or upgrade your office space, and you’ll have more luck. Investors are looking to build companies step-by-step.