If your idea provides enough value for people, investors are more likely to provide the necessary funding.
Asking for money is never fun, but it can be a dreadful experience as a startup when you need people to invest in your ideas. Of course, if it’s a business, product or invention you are passionate about, it will pay off in the long run. Although you might be met by repeated rejection, you must persevere. If your idea provides enough value for people, solves a problem or helps them in some way, investors are going to be more likely to provide the necessary funding you desperately need.
When presenting to your investor audience, do so with poise and preparation. Here are eight ways to land the first investment in your startup.
- Make some money. Investors want to know your idea can make money. So, before you start looking for investments, build the first version of your product, get it in front of real users, and start generating revenue. Even your first few thousand dollars can go a long way in demonstrating the potential of your business. This kind of measurable result is especially important to angel investors and startup accelerators—more and more of whom are looking to invest in startups that have already proven the validity of their business model.
- Pitch competitors. Know your message well, and be prepared. You are not the first to make a pitch to them, so it needs to be well executed. Be prepared for the questions that are to come. Most of these will extend beyond the product or service itself, to you and your team. Investors are keen to the fact that a successful startup operates under many variables. Competitors offer key research for your market, and can absorb your company, leading to expansion. Be sure to not give too many details, just in case you decide against their investment. Be careful, some competitors take these meetings to pick your brain.
- Startup accelerators/incubators. Accelerators and incubators offer startups the opportunity to better secure venture capital funding later. Accelerators provide mentorship for a specific amount of time. Not only do you receive the knowledge and assistance of mentors, but a small amount of seed money is given, too. This assistance is in exchange of a portion of equity in the company.
Incubators, on the other hand, are often funded by more public entities. Incubators provide office space in exchange of geographic relocation. Both accelerators and incubators are application processes, but incubators can be obtained through trusted partnerships as well. These options provide more support than financing. Often accelerators and incubators are a good first step.
- Treat your customers as investors. Your early customers can actually be some of the best investors in your business. Especially if you’re running a B2B startup, seek out arrangements in which you develop frequently requested features with their investment. If you’re marketing direct to consumers, be transparent about the vision for your company, and do not undervalue your product or service. Consumers who feel invested in your mission will reward you with loyalty and continuing business.
- Nonprofit grants. Grants are amazing because you don’t have to pay them back or give up any ownership of your company. However, applying for grants is endless and a constant consumption of time and energy. If you know how to write in the formulaic manner that grants require, you may be in luck.
- Angel investors. Oftentimes, these networks invest in companies that are operational and have a revenue stream established. Bio-tech is an exception. A polished presentation is a must. The presentation must discuss an in-depth business plan and projections. Angel investors begin based on your idea, but invest based on confidence in management. Just remember, as with most investment deals, it usually comes down to who you know. Make sure to take advantage of your existing network, and ask your contacts for introductions to investors they may know.
- Crowdfunding. Crowdfunding your startup investment is a great way to demonstrate transparency to your audience. It can cause your consumers to feel more personally invested in the company. Focusing on email campaigns is a great way to obtain pledges. Make it personal to foster a more personal connection with customers. Include a little brand-specific thank you gift for those who donate. Design separate sponsorship levels or tiers for varying degrees of donations.
There are crowdfunding platforms that target industry-specific projects. Little seeds of conversations with higher-ups at crowdfunding platforms can blossom into big investments. Take every opportunity to network and connect with those in the industry.
- Personal contacts. When raising money from non-business entities, two methods reign true: many small incremental investments or a few larger ones. Sometimes a combination of the two can be harnessed, but it depends on your product and company experience. When asking personal contacts, you are less likely to harm a relationship over a smaller donation. More money equals more investment, fiscally and personally. Often personal contact investments come from a more patient source.
Make your pitch to personal contacts. Keep it business-like and professional with your personal touch. It is better to be more professional in these situations because you will be taken more seriously. Family and friends are more likely to invest if they feel confident in your business and abilities.
It is up to you, which methods you will utilize in which order. Finding investments for your business is not easy, and requires serious hard work. Work hard and know yourself, the product and your company. If you are genuine and determined, your passion will be contagious. The funding will come if the idea is strong and the need is there. Overall, be well-versed in your company and strategies. iBi
Tara Reed, CEO of AppsWithoutCode.com, runs the Apps Without Code Bootcamp—an eight-week program to validate your idea, build the first version of your app, and launch your startup. Learn more at webinar.appswithoutcode.com.