How to Attract Investors
If you have a business or idea and need capital, investors may be the fastest route to bring that concept to life. A business that can’t keep up with expenses…is living life on the edge. In a company, cash is essential for growth.
If you’re an entrepreneur or a small business owner looking for funding to grow your firm, then the information in this post will help you attract investors. We’ll also go through what investors look for while evaluating your business.
Why Are Investors Important for Business?
A company may survive without investors. This we know. However, a company without investors is losing out on valuable assistance to get to market quicker, and expand with their expertise. Investors are vital to every company because they help it grow faster. Getting investors isn’t always straightforward. But it’s essential to know what kind of investor your business needs and how to get them.
When to Seek External Investment
Your business may attract investors at any time. But “now” may not be the best moment. It’s better to seek investors while you’re growing. It’s easier to raise fund when:
- You have an excellent proven concept for a product or service but need funding for building it.
- Your company is profitable, but not growing as fast as you would want.
- You need money to expand into new markets.
- You have a high-growth company strategy or an original concept that has created buzz and draws in investors.
Which Investors Are Right for Your Company?
If you have a solid company idea and need investors, start with your family and friends. Your friends and relatives may be ready to invest in your concept if they think it will succeed. Professional angels usually take a 5% ownership interest, whereas venture capitalists typically take 15%-30%. Angel funds typically spend $25,000 to $500,000, whereas VCs often invest $250 million or more.
Those numbers shouldn’t deter investors. Many financing options do not need ownership shares or voting rights. Bank loans come with a set rate of interest. But they’re hard to get and generally demand collateral. Crowdfunding is a fantastic method to generate money online with little or no commitment rapidly. You may accomplish this on your website or Kickstarter and Indiegogo. Remember that investors do not own any equity interests in future earnings and are not entitled to ownership rights.
What Do Investors Want?
Many prospective investors seek confirmation that a business will thrive with their assistance and direction before committing time or money. Some questions they may ask themselves are:
- “Do I trust the entrepreneur?”
- Is this sector expanding?
- “Can the firm’s product be copied?”
- You may ask queries that suit your requirements.
Invested Companies That Succeed
Financing has propelled some of the unicorn businesses to success. Here are some instances of the companies that needed funding to expand:
A group of friends got together ot build an app called WunWun – an app for on-demand courier and delivery. VCs rejected them for their lack of logistical expertise. But they didn’t give up until they had secured $15 million from conventional investors.
Airbnb was also changed the landscape of the travel and bookings world. This venture has become one of the most profitable businesses in recent times. It took personal savings before appealing to family, friends, and acquaintances for funds, as well as external investors like Y Combinator.
Another example is Fiverr, a business based on a freelancing talent marketplace. The entrepreneurs utilized their savings and client money to start raising $500,000 in outside financing.
How to Attract Investors
Getting business investors is just as difficult as you make it. This may get done in several ways. But just a few work. Some businesses, for example, use social media and crowdfunding sites like Kickstarter. Anyone with a fantastic idea or product may use these sites to generate cash by asking others to contribute money in return for incentives. The more individuals you reach out to, the greater your chances of finding an investor. The trick here? Be ready! Even if you aren’t seeking financing right now, you need an executive summary to build a pitch deck that effectively conveys your company’s unique selling points.
Getting business investors is as difficult as you make it. It can be done in several ways, but only a few work with persistence. Some businesses, for example use social media and crowd funding sites like Kickstarter. Anyone with a great tangible product can use these sites. It’s a numbers game so the more individuals your reach out to the greater then chances of finding an investor. The trick? Be ready! Even if you don’t need cash right now, start preparing your executive summary and pitch deck. Reach out even as early as 6 months before you think you need the cash.
Investors seek guarantees before making significant investments. Here’s a quick guide to help small companies navigate the investment barriers:
- Outline your company’s requirements and how much money you’ll need to get started.
- Create a pitch deck to explain your company’s vision and competitive advantages.
- Distinguish your company in simple words so investors can grasp it fast – “five words to a five year old”. Many small companies use jargon that is difficult to understand. This reduces their prospects of funding.
- Know your audience before you pitch. For example, why do they invest in some sectors over others? It also helps if you know someone who knows the person you’re pitching to.
- Read articles on raising money for small companies or attracting investors from sites like Entrepreneur magazine (entrepreneur.com).
- Keep networking. The ideal method for investors and entrepreneurs to meet is local networking events or online platforms like LinkedIn.
- Create a competitive edge by thinking of something fresh. This can help prospective investors understand your company’s unique selling point.
How to Avoid Losing Investors Interest
There are things not to do as well while recruiting investors:
Not Understanding Your Business
It doesn’t matter if this is your first time addressing an investor. Make sure your points are factual and relevant.
This will give your prospective investor the impression that you are eager for money and will likely vanish with it if they invest in you.
Lack of preparation
Be confident while dealing with company investors that have decades more expertise than you. They’ll see through it and realise they should spend elsewhere if they want a successful project/business leader!
The key lesson is that you should always portray yourself in the best light, be authentic, confident and know your business and numbers. Investors invest in you, the team and your product – but each to different extents. So if you get rejected by one, keep going and don’t give up! As mentioned before, it’s a numbers game and only a matter of time if you’re prepared and persistent.