What is one surefire tip to find investors and/or making the right impression on an investor?
The following advice around how to find investors is provided by members of Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.
I’ve seen investors decline to invest in startups because their founders were so unsophisticated about legal formalities and/or because there is no documentation about intellectual property ownership. Before you find investors, you need to form a legal entity, have agreements with all partners and employees, have work-for-hire agreements with contractors, have relevant trademarks/patents, etc.
Investors invest in you, your idea and your story. Yes, they’ll want to see the numbers, but that only supports that you are legitimate. It does not get them excited about the future and about what’s possible. Know your story and clearly articulate your narrative. Talk about how you’ll impact customers and the people you will help. Build a narrative around a cause they want to be a part of.
Look to find investors who focus on startups at the same stage and in the same sector as yours. Warm introductions increase VCs’ comfort level and show your networking skills. Do whatever you can to get some. Lead with a 60-second pitch that generates excitement. When you meet, clearly and briefly articulate your value proposition and outline how their money will help you reach specific business goals.
You should know your startup costs, sales projections, growth costs and more. Any potential investor will be sure to ask about these metrics.
Some founders have a tendency to pitch their business to investors like they’re reading from a script. Not everyone loves vanilla. So, what gets your ideal investor excited? To answer this question, you need a clear vision of the type of investor you want for your business. Tailor your pitch accordingly once you’ve clearly defined the monetary, experiential and character attributes you value.
Sophisticated investors understand that investing in a startup or early-stage company is a risky venture. No investment is a “sure thing,” and while confidence is appreciated, hubris is not. Knowing the risks specific to your project and being upfront with your investors about those risks is a way to show your understanding of your company and its industry.
Take the time to understand the underlying motivations and goals of each investor and investment group. Investors are driven by a broad spectrum of motivations, from purely financial returns to altruistic endeavors. Finding investors is more about attracting the investor who is aligned with your overall goals than it is convincing an investor that your company is the right fit when it’s not.
Nobody cares about an idea – they want traction. Show them that numbers are moving in the right direction and you’ll have interest from many investors. The numbers validate everything.
Everyone wants to be the first to be second to invest, as the saying goes. One way to attract investment is to get backing from a well-regarded industry insider who knows your industry and understands your value proposition. Investors often can’t go deep on every investment. So if they see that an expert supports your idea, it makes it so much easier for them to make their decision.
Always be direct and ask for the money. You want money from them at some point. So be upfront. Give them your pitch, listen and then give them your ask. You wouldn’t try to close a sale without asking for a contract; why would you try to close an investor that way?
Investors know you are pitching to them for funding, obviously. But they do not like to be treated like a bank, as if you just want their money and want nothing else to do with them. Make the right impression by making the conversation about more than just the money. Make a relationship, tell a story and show how this investment will truly benefit their lives as well. Show that you care!
You should know your industry and be transparent about the service you provide and how it separates you from your competitors. You also need to be realistic about your projected growth and revenue because serious investors can tell when something is too good to be true.
If they sense that you are hiding something (which they are usually good at), it will immediately raise a red flag. But if you come across as completely transparent, that’s likely to inspire trust, which is crucial when it comes to making an investing decision.
About Our Partner
The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.