Entrepreneurship 101: How to Impress Investors
It is one thing to be a young entrepreneur with a business idea and another to bring it to reality. A significant part of giving life to a business idea or starting a new venture is capital, and investors are the people to look to.
However, your business might not even be a start-up; your company might have existed for years. But you need to grow and expand, which means getting investors to invest in your business. Whatever level your business is at, you need to attract investors, and the question is how?
How do you impress and convince potential investors to choose your business from the hundreds to thousands of applications before them? This is the question this article seeks to answer. So, if you want to know how to impress investors, keep reading.
Investors are people or entities — whether a firm or a fund — that provides funding for a business in the short or long term. Investors often have a stake in the business and receive returns in the form of appreciation and/or dividends.
There are different types of investors, with various degrees of risks, capital, investment style, and time frame for the return on investments (ROI). Some investors only go for low-risk businesses guaranteed to benefit them, although the return is low. Others like to invest in high-risk companies to have a higher return.
The following are the different types of investors:
An angel investor is a person with enough money to fund a start-up. By investing in your business, the angel investor gets an equity stake.The money from this type of investor can be one-off or in instalments based on the company’s needs. Most times, the money comes at the beginning of the business, when you are still developing the product or service. Most investments made by angel investors are high-risk.
Unlike angel investors, venture capitalists invest primarily in startups and small businesses. Venture capitalists are not interested in helping you when you are about to launch a product or business. Instead, they focus on companies that have kicked off operations and have solid traction, and growth potential.
Also, venture capitalists focus on businesses that want to expand but do not have the means. Like angel investors, they have a monetary interest in the company, which they sell/exit later.
Peer-to-Peer (P2P) Lending
Here, you get money directly from individuals. This type of investor does not require intermediaries like banks. Peer-to-peer lending involves raising funds online in exchange for a service or product. An excellent example is crowdsourcing.
The level your business is in and the amount of funding you need determines the type of investor to go for. However, after identifying the type of investor you need, you must impress them. The next section focuses on how to make this happen.
It’s one thing to attract investors and another to impress and get funding from them. Below are eight ways of doing so.
A business plan describes your company’s objectives and how you plan to achieve them. The business plan is the written road map that provides information on various aspects of your business, from marketing, finances, and operations to investors. Whether you are a young entrepreneur with a start-up or an established company, a business plan is vital in convincing investors to fund your business.
The business plan should contain the following:
- An executive summary of what the business plan is about
- An overview of the industry you plan to enter or you conduct business in
- An analysis of the target market and competitors
- Details of sales and marketing plans
- Management structure, including legal and external human resources
- The operation plan, detailing physical necessities like labor, office space, equipment, etc.
- The financial plan, with a focus on the viability of the business, projected time frame for ROI, income statement, etc.
- Your unique value proposition
Avoid inputting too much information into the business plan to prevent boring the investors. Focus on the key point by creating bullet lists and highlighting your business’s strengths.
Keep in mind that your company’s growth potential determine the level of investor interest. Therefore, highlight this but ensure the projected numbers are achievable and not just written to entice investors.
The truth is you are not the only one offering a particular type of product or service. Even as a young entrepreneur with a fresh idea, there is also someone somewhere who has the same concept. Therefore, the question investors want you to answer is why they should pick you.
What makes you think your business is different? Why do you believe you are the next big thing in the social media space? Why will you succeed where others failed and some are currently packing up?
These are some of the questions investors will ask directly or indirectly. Answering them will take you a step closer to the funding you need. As such, explain what sets your company apart and back it up with facts.
Tell them what your business does or the solution it brings that your competitors are not providing. Get them to see what you see and be excited about the future. Your potential investors want to feel inspired, so inspire them.
One mistake business owners — especially startups — make when trying to attract investors is focusing too much on the future. What about your past achievements? You did not just get to where you are; you must have had some accomplishments.
As an established business, talk about how you started, got to where you are, and what you want to achieve by expanding. If your revenue has seen steady growth in the past few years, mention it. Also, highlight if you created a new product or service that outperformed your expectations.
As a startup without many achievements, you can show the reception of your target market to your product or service during a market survey. If you have successfully pioneered other businesses, mention them and what you did to make them succeed. Always provide proof of your achievements, as word of mouth is not enough.
An elevator pitch is a concise summary of what your business is about. Elevator pitches are used to pique the interest of investors, especially venture capitalists. The investor will schedule a follow-up meeting if you have a successful elevator pitch.
When preparing for an elevator pitch, focus on what your brand stands for, the problem you want to solve, and the solution. Include your target market and how you plan to outsell competitors. An elevator pitch is not like a business plan presentation, so go straight to the point.
When making your business model presentation to potential investors, incorporate your brand. Add your logo, tag lines, color, mission, and vision. Brand inclusion shows that you are detailed and decisive and your company already has a presence.
This is crucial as investors shy away from companies without proper branding. If you build an app and fail to include your brand in your presentation, the investors might think you want to sell it to bigger companies. Investors want to know you have a long-term vision for your business, and it starts with showcasing a strong brand identity.
Having a great business plan or a promising product or service does not mean that investors will immediately hand over their money to you. They know there are several variables and eventualities in business. So they want to know how you will approach and solve issues when they arise.
Now, you can be preemptive and highlight possible issues in your presentation and solutions. Alternatively, you can wait to conclude your pitch and have the investors raise issues for you to address. In either, your answer should be unambiguous. Let them know their money is safe and you are prepared to handle issues.
If you are a young entrepreneur, it helps to have a co-founder. Investors are more interested in start-ups with impressive teams than a one-person army. Angel investors and venture capitalists are known to be partial to start-ups with more than one founder.
However, your co-founder’s qualifications also matter. Therefore, you cannot pick anyone because they are your family or friends if you want to entice angels and VCs into investing in your business. It must be someone with experience in the industry you want to enter, and they must have a good track record.
While investors are interested in different aspects of your business, their primary concern is whether they will get back their money and when. As such, when all has been said and done, explain the profit margin and how long it would take for them to get an ROI.
In this article we have explained eight ways on how to impress investors. Whether your business is a start-up or an established one, impressing your investors and raising capital is key for growth and survival.