As the owner of a small smart-up business, making solid business start up connections is the only way to get you in front of investors looking to put money into your company. However, many people go about this the wrong way: they put a huge amount of effort into networking and getting the right opportunities only to fall at the last hurdle when pitching to investors. To ensure this doesn't happen to you, make sure you follow the tips below:
Do Your Homework
When you're looking for investment in your company, there are a number of different avenues to look. It's important that you do your homework on the type of investors that will be looking at your company as each investor will need a different pitch. As a start-up, you will likely be looking for funding through three channels:
- Angel investor—a wealthy individual who provides significant capital for expanding small businesses.
- Venture capitalists—a company that provides capital for start-up companies.
- Micro venture capital—companies that provide smaller amounts of finance than venture capitalists.
Each type of investor or investment company will require a different pitch, so it's important that you understand exactly who it is you're pitching to and why they should invest in your company. The easiest way to do this is to research the type of companies that the investor has previously worked with; however, this may not always give you a suitable angle. In such cases, try and reach out to existing invested companies as they will be able to give you guidance on exactly where the "hook" was that secured their funding.
Have Your Numbers in Order
A very common stumbling point for start-up companies seeking investment is that they don't have their financial information fully prepared when seeking funding. Of course, the vast majority of companies will have their accounts and financial projections complete and ready for review. But this isn't enough. Oftentimes small businesses will have errors in the figures that can cause investors to doubt projections and ultimately, the entire business.
Therefore, it's important to have your numbers validated and processed by a reputable accounting firm prior to making your pitch. One of the main things that investors are looking for is security; they need to know that their money is safe in your hands. Therefore, having a trusted accounting firm audit your documents will give potential investors the peace of mind they need and allow them to focus on the quality of your business that you're bringing to the table.
Put Forward a Rigorous Growth Plan
Investors not only need to know that their money is safe in your company, they need to know exactly what return they can expect in the future by investing in your business. The main issue that small business owners face here is that they are too optimistic. Yes, you do need to put forth an attractive proposition that shows how your company will grow within the market. But your projections have to be realistic, so it's vitally important that you rigorously analyse the market to understand how your company will perform over the coming years.
There are a number of ways that you can grow your business and each of these will be attractive to investors if properly executed. However, there are a few tried-and-tested angles to consider to heighten the interest of investors:
- Market Development—For whatever market you operate in, have a look at how this market performs in adjacent cities and states. Find out who the main competitors are and their market share within particular areas. Once you know this, you can estimate with reasonable confidence how you can grow your business geographically and what hurdles you will encounter when doing so.
- Sales Channels—Look at alternative ways of selling your product in order to reach a larger customer base. Taking your business online is expected and this won't be enough to hook investors. However, if you can present a viable marketing strategy that involves utilizing different channels across the internet, then you may garner more interest in your company.
- Product Development—Diversification is a key way to create interest in your business. If you are able to put forward a solid plan that shows exactly how you will move into different sectors, investors will be able to see how their investment will grow and will be more likely to front capital for your company.