As entrepreneurs, we know that getting investors for your startup can be challenging. A great business idea is only part of the winning formula.
Investors, whether family, friends, business associates or professional venture capitalists decide which businesses to find based on multiple factors that include well conceptualize business plans and the markets growth potential.
Here are tips to include in a well-written business plan to help you win over investors at pitch meetings and get your new business funded and launch.
Demonstrate low risk
Most venture capitalists prefer to invest in previously established companies rather than brand-new product development start-ups due to the high risk of business failures. However, that doesn’t mean that you cannot position your new business as one that has already been launched.
Many companies have secured financing investments by showing product prototypes, initial orders from retailers, crowdsource statistics and other demonstrations of your firm’s market foothold.
These type of early market indicators help investors to see your business model working in the real world, thus reducing their risk and exposure of their capital.
Your Team is Valuable
Investors know those good businesses are built by great teams, so they will want to investigate all the people in your company team. Your team’s skills and industry contacts are valuable assets of your business
sure to have all the key positions filled so that investors do not worry that your business model will be unattainable due to lack of skill set.
Venture capitalists will be impressed with your ability to attract talented individuals to pursue your company mission.
Dumb Down Your Benefits
You’ll want to condense the value, to your customer, into a sustained tagline or slogan that will communicate your marketplace advantages to investors.
This is not an elevator pitch, that three sentence conversation about what your company means. It is more of the reasons WHY your customers would purchase your product or service. It is your vision and reason to exist in a few words. Some famous examples of taglines are Apple – Think Different, Dollar Shave Club – Shave Time, Shave Money and L’Oreal – Because You’re worth it.
Be sure to include a clear-cut plan for how you will distribute your product. Will you sell to brokers who then distributed to local retailers, selling business-to-business or online via an e-commerce website?
Include details of the ordering process, delivery and, warehouse plans.
Tell Your Story
Investors are people, and everybody likes a good story. Begin your pitch presentation with an interesting story about how your product solves your customer’s problems. This is a way for you to clearly demonstrate your USP unique selling proposition in a more easily understandable and entertaining way than a boring PowerPoint presentation.
Put sufficient emphasis on reviewing all your competitors, in all levels of the marketplace, and also your indirect competitors. An excellent way to show this data is in a grid matrix form that compares your startup to each of these firms products.
While you will have some competitors that are closely aligned with your product, in distribution channel and price point, you have many that are at lower and higher price points which solve the same customer issue.
Indirect competitors are those companies which customers may purchase items to try and solve the same problem that you now propose to solve with your new startup. An example, your customer is hungry, you want to open the best burger joint in town; Bob’s Burger is your direct competitor and, Sal’s Pizza is your indirect competitor.
Your investors will appreciate your thorough and thoughtful process of comparing your product these other companies.
If you want investors to give you money, have your own financial house in order. This means you will want to have a business banker and an accountant at the ready when your business is funded.
Venture capitalists will see this as a sign that you are prepared to start right away, and you have a professional team in place to communicate your progress with the investment firm’s bankers and accountants.
Also be clear about the amount of money you are requesting, for the first round of financing. VC experts recommend that you request start-up financing first and then go back for the second round of fundraising after you have achieved the goals set forth in your startup land.
Hold on to Your Equity
your investors will request equity in your firm in exchange for their capital investments. But, you will need to retain as much ownership as possible, since you may need that equity for future rounds of financing.
If you give up too much equity early on, you could easily lose control of your own startup firm.
It is not uncommon in the venture capitalist industry to see entrepreneur founders who only have 5% of the company they launched. Don’t be one of them!