Whether you are about to embark on your pre-seed round or are just entering the C-series stage, attracting the right investors to your startup is never easy. And, as the number of innovation-focused businesses seeking funding increases, investors are becoming all the more demanding.
So, how can you take your startup to the next level and survive the first – and most critical – five years of trading?
Here are 5 effective tactics to get you a step closer to securing the funds you need.
Choose The Right Types of Investors For Your Startup
The first step to successfully attracting investors to your business is to be clear on who you are trying to attract. Knowing your target is crucial to creating a winning strategy for each investment round.
Here are some of the best choices for entrepreneurs:
- Apply for a small business loan at specialized banks
- Find venture capitalists or private equity firms willing to buy equity out of a promising project in exchange for funding
- Pitch your concept to angel investors who specialize in the industry and can contribute their own knowledge, expertise, and network
- Find EB-5 investors and attract investors to your business who are alien entrepreneurs looking to obtain a Green card through their investment.
Pro tip – Unsure about whether you should bootstrap your business or seek venture capital? You might not need to choose between the two! Bootstrapping is a phase common to 75-85% of all startups, and most management teams often decide to only accept external funding when scaling up their initially-bootstrapped business.
Create a Roadmap and Deliver an Accurate ROI Forecast
From the seed round onwards, every time you attempt to raise funds can determine the failure or success of your company. And, according to recent statistics, startups that raised $1 million and over during the seed round were twice as likely as other startups to raise subsequent funding.
So, how can you make sure to score the right results during the first investment round? The key is in a clear, transparent, and honest forecast. Investors face significant risk when investing in young startups, and they’ll be looking for evidence that there is an actual market demand for your products or services.
Make your idea viable from the start by demonstrating how you are planning to use the funds raised, the results you’ve achieved so far, and the market potential of your concept. While emphasizing your mission and vision is important, go beyond the theory by presenting data like historical figures, balance sheets, cash flow forecasts, and unique value propositions.
Gain A Deep Understanding Of The Industry and Internal Trends
Funding rounds are designed to give investors the opportunity to take part in a growing project from the start. But when doing so, they’ll become partners, equity owners, or shareholders, which makes it vital to prove that they can trust your vision and expertise.
During your pitch, make sure to show your knowledge and experience in the industry, highlight emerging trends, and prove that there is an actual need for your product in the current market.
Show Your Passion and Commitment – and Connect At a Deeper Level
Supplying a clear rationale for your actions, providing accurate data, and delivering a stellar pitch are undoubtedly essential aspects of convincing an investor to contribute to your business. However, the number of startups seeking venture capital is at an all-time high, and standing out against the competition is harder than ever.
Letting your passion and commitment shine through and connecting with each investor at a personal level (e.g.: empathizing with values they have shown in the past) can help you gain a unique competitive edge. Make sure to research each investor’s history, past projects, and the companies they have previously invested in to arrive prepared at your meeting!
Rely On a Solid Management Team and Industry Connections
Investors know that launching a successful startup isn’t a one-person job. So, before meeting with possible leads, make sure to acquire the right management team and show how each member’s human capital will contribute to the business’s success.
Lastly, don’t give up at the first denial! On average, entrepreneurs need to navigate 40-50 meetings with investors to secure their first $1 million in funding!