Funding is the number one factor that can drive or restrict your startup idea becoming a reality. While bootstrapping (essentially doing everything yourself or hiring people on the cheap) is an option, this can lead to some obvious issues along the line. Especially if you’re not confident in your skills or those of the people around you who are willing to work for almost nothing. Assuming this is the case and you also don’t happen to have a wad of cash lying around, you’re going to need to head to investors. Seeking investors is a scary step in the startup process so you’ll want to ensure you’re fully prepared. Below are 6 points you should focus on to get your startup, and yourself, ready to pitch to investors.
6 min. Read
Funding is the number one factor that can drive or restrict your startup idea becoming a reality. While bootstrapping (essentially doing everything yourself or hiring people on the cheap) is an option, this can lead to some obvious issues along the line. Especially if you’re not confident in your skills or those of the people around you who are willing to work for almost nothing. Assuming this is the case and you also don’t happen to have a wad of cash lying around, you’re going to need to head to investors.
Seeking investors is a scary step in the startup process so you’ll want to ensure you’re fully prepared. Below are 6 points you should focus on to get your startup, and yourself, ready to pitch to investors.
It will save you in the long run. Trust us.
Investors think long term and want to ensure the money they’re investing in you now will show a return in 5 or 10 years. Doing your market research will help you identify whether or not your startup idea will survive, let alone flourish. Have your startup idea set in stone, if you have any doubts or an inkling you may change your mind, you’re not ready to head to investors. You must know the ins and outs of your idea, as well as the business model in today’s economy and tomorrow’s.
Investors don’t just hand over money to anyone, yet anyone can start a business. In return for funding your startup, they will own a portion of your business. You need to be able to show them scalable growth opportunities otherwise they won’t believe in your idea. Know your numbers in regards to sales figures, growth rates and profit margins. Be ready to discuss any of these points in greater detail, it may spark an interest in an investor and they’ll want to know more if this is the case. If they don’t believe in it, they won’t want to own it. Simple as that. A true skill of a great entrepreneur is developing a business that has the ability to grow business as well as its audience.
It’s also worth noting you should choose your investors wisely. Don’t just run into the sunset with the first investor that gives you some attention. Investigate everyone and choose wisely. Some investors are nagging critics who will pretty much burn you out before you’ve even begun, some have an incredible expertise and are happy to become a partner rather than a ‘boss’, some are mentors and some offer you no help at all. Give a look at their Twitter, blog or website and discover the types of products they invest in and how it usually turns out. Decide what you want and what you need out of an investor and use this knowledge to choose someone you’ll have a great business relationship with.
If investors decide they believe in your idea and ask where you’re going with it, you should be able to tell them. Doing your research will also allow you to know your next steps after the pitch. If it goes well, now what? Be prepared to answer what direction you’ll be heading in immediately and in the long run after having met investors, as well as information crucial to the business.
Some questions you can ask yourself are:
It’s a wise idea to complete a Lean Startup business model as it helps you to identify the answer to all these questions. The lean startup is also a continuous cycle that enables you to develop the best product for your market, as well as discover who your target market is, key partners and customer acquisition costs to name a few.
At Apps People, we run workshops to help startups validate their idea. We work on the Lean Startup Model with you and help you put your best foot forward for when you do approach investors. Investors will ask you about every little detail of your business plan, if you can’t answer, you can throw the idea of funding out of the window.
Building up your networks is one thing, but building a team of experts in the field is another. If you have no previous startup experience, filter through your networks or use the power of the internet to source someone for your team who does. Investors will appreciate having someone with knowledge and real-world startup experience. Otherwise, it can prove to be extremely difficult getting investment for your first startup.
Perhaps you had the chance to seek investment from some friends or family or even dabbled in enough crowdfunding to get a basic prototype up and running. Investors would love to see something visual, more so something you’ve built! A prototype is not essential to take to investors, however, it is more of a valuable insight into your startup than a bunch of notes and a slide show. You’ve built a working prototype and you can now seek investors for the next stages of app development such as the alpha and beta launches.
Most importantly, are you passionate? Do you believe in your startup idea? If you don’t, it’s probably visible. When giving a pitch, be passionate about your startup and convince them they should be passionate about it too.
The passion and investment you show during your pitch will give them an idea of the attitude you will have towards all future business decisions. Lacking confidence is a big mistake as it will come across that you lack confidence in your idea. This is important as investors are betting on you as much as they are the startup. Show personal dedication to your startup and prove that you’re in it for the long run. Know what you’re talking about and get it down to a concise pitch. If you’re rambling on not know where you’re going, they’re going to think the startup’s process will be the same. They want it as fast and efficient as possible.
Investors are not your supportive best friends. They won’t be happy until you get cash back as a return on their investment. Include some killer revenue options, work really hard on your value propositions (what sets you aside from the rest) and pitch an idea your investors can’t say no to.
You may need to speak to a million (not literally, but still a lot) of investors before you find one that believes in your idea. Essentially every big company got rejected when they were startups, including Skype and even Airbnb! It’s fine and actually is normal- take each rejection as a learning curve and keep at it. You’ll get there eventually!
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