Whatever goals you set out to achieve, the key to attaining it is proper preparation. We have all heard the statistic “90% of all startups will fail”. This is hard to accept, but true nonetheless. So, before seeking funds from any investor, there are some steps that must be taken that will improve your chances of getting money and also put your business in a better position to grow. Whether you’re seeking $1,000 or $1 million from an angel investor or your family and friends. Having a thick skin, an open mind and solid research, or preferably sales results to support your pitch will take you through your first meeting with potential investors and improve your chances of convincing them. Here are 4 things you must do before approaching any investor for money.
- Research: Research will give you an upper hand when meeting with potential investors. It is your way of listening to investors. What should be first on your mind when researching a potential investor is what their motivations are. Find out their lifestyle, interests and businesses they own or are affiliated with. You can discover their motivating purpose by reading between the lines about how they have spent their time and money. Be sure that any potential investors will be researching you – through your company or personal website and social media platforms, so make sure you are doing your research as well. Attend seminars, conferences, and networking events to learn and even interact with investors before approaching them for funding. You will be able to learn more about who you want to partner with, who is interested in your business, how well they might understand what you are trying to achieve, and how investor relationships work.
- Prepare to present a business, not an idea: If you’re an investor, you will hear ideas almost daily – some of them even good ones, but a good idea alone cannot guarantee success. Even an excellent business plan is not enough to attract an investor. You must present a business with a model that scales, a product that sells and a team that can achieve. Even with all that, you still have to prove you know what you are doing. For investors, the entrepreneur is as important as the business – sometimes more important. Make sure you have some experience in operations that will enable you illustrate how you’ve handled hurdles and what opportunities you are currently developing. Having additional experience under your belt before even asking for funding increases your ability to generate a return for that investor.
- Know why your product will work: One important piece of preparation you must do before seeking funding is to know why your product or service will work. One big reason startups fail is that they are launched in the wrong place or at the wrong time – or both! Several business pitches get shot down by investors because entrepreneurs think they have a valuable idea(and maybe they do), but fail to do the market research and find out basics like the target audience, the size of the market and the demand for their product in that market. Pitching to investors without having this basic information at your fingertips is a waste of time for everyone involved.
- Know exactly what you want from the investors: You must know what you want before you ask, right? Surprisingly, several entrepreneurs don’t figure this out beforehand. They go into investor meetings with only vague ideas of what they need and when the question is posed, they come up with answers on the spot. The problems with this method are obvious. Ask yourself what exactly you want from a potential investor – whether it’s money for equipment and to hire additional team members with skills you need. If this is what you want, then you would be better off finding a partner with these resources and partner with them to share the revenue generated. If you want not just an investor, but a mentor as well, think carefully about how involved you want them to be in the business long term. Know what boundaries to set that will make you have a comfortable relationship with an investor. These questions will help you identify the kind of investor you need and also prepare you with a satisfactory answer should you be asked what you want.