To an entrepreneur, an idea is the first step. However, execution requires capital. Whether you're on the hunt for a $1 million or $1000 in venture capital, here are a few things you need to keep in mind before approaching potential investors for funds.
An efficient team is crucial to finding an investor. In fact, a question that every investor will put forward would be whether you or your partners are competent enough to manage your business.
To put it short, the investors would want to ascertain that you and your team could carry out the business plan that you have presented and give them sizeable returns. Thus, choose your partners wisely who can help you decide on the strategies to run the business and how the later phases of development should be.
First impressions are everything. Your pitch is your chance to make a lasting impression. In order to communicate your idea effectively, your pitch deck and business model must be top notch.
Furthermore, concentrate on adding minute details, which might be of relevance to the investors to the business model. For instance, manufacturing costs, current funding, size of the market, liabilities, and debts and so on. Details such as the target customers, strategies, and overall cost should also be included in the business plan.
When pitching, remember to be confident and passionate about your idea because if you doubt yourself, then so will the investor. However, you must make sure that your goals are actually achievable. It might initially seem like a good idea to keep valuations on the higher end, but remember that investors are looking for a reasonable number.
You must also present the investors your plan on utilization. It is important for investors to know whether their funding is being used to develop your idea, improve operations, or if it is being used for the payroll of the firm.
When building up an investor list you need to be wary of the fact that by accepting finance you are taking on a new relationship. In some cases, these relationships would run for a long time. Investors also add value along with capital, therefore, running a background check on investors is crucial.
Carry out extensive research and take your financial needs to the right investors after careful consideration. Bank loans won't be the right fit for you if you don't have sufficient cash flow; Venture Capital investors concentrate mainly on capital gains.
Lastly, finding the right investor isn't something that happens overnight. In fact, you will have to be a patient listener. Be prepared to face criticism (or a direct no) and keep answers ready for any difficult questions that you think may be asked.
It is also important to enter the meeting room with an open mind. Investors like VCs can add more value to your existing business plan; therefore, an open mind and flexibility can drastically improve your business.
Know your potential investors, and let them get to know you and your team. Paint a pretty picture with your business plan and make your investors feel like they are a part of it.