Your startup venture may require a significant amount of capital in order to launch successfully. These funds may be used for everything from paying overhead until the company turns a profit to purchasing equipment, inventory, facility space and more.
If you are launching a new venture, you understandably may be nervous about raising capital for your business. Many investors are financially savvy, and they also may be skeptical about your venture’s possibilities as well as thorough in their review of your business.
The reality is that most investors look at a few key points before deciding whether to invest capital in a venture or not. With this in mind, learning about these points can help you to position your elevator speech and business proposal in the best possible light.
1. High Returns
One of the first factors that venture capitalists and investors look for is a high return, but they want to see great returns with a clear exit strategy. They do not want their funds tied up with a venture indefinitely.
Most investors make a financial decision based on numbers rather than altruism. They want to have a large enough share in your company to get a reasonable return on their investment for a period of time. Your initial offer should therefore be structured carefully so that they are enticed to participate. More than that, you must also prove that your financial analysis is reasonable and accurate, and that your team is capable of meeting any financial obligations.
2. Market Opportunity
Another factor that investors focus their attention on is market opportunity: they want to see that you have a reasonable or large market that you are appealing to currently.
You must also address the issue of your competition. How is your product or service substantially different than what is already available in the marketplace, and how will you market your product or services as being unique to appeal to a large audience?
Your presentation and business proposal should focus on the features that make you different and better than the competition. You should be prepared to answer questions about all the problems your competition is facing. Furtermore, you have to be able to speak intelligently about how you will address or mitigate those same challenges in your market.
Both your business plan and your speech should clearly and plainly address these points. If your plan and speech are too confusing or fuzzy, you may easily turn off investors.
3. Investor Fit
Investors are looking for an entrepreneur who they can develop a solid and exceptional relationship with. This means that the investor, the entrepreneur and the project or opportunity should be aligned and have a certain level of chemistry.
Some investors prefer to take a hands-on approach with their investments, and your business can benefit greatly from the professional insight of an investor who has experience in a certain market segment.
You should be aware of who the investors are that you are speaking to. Research your audience up-front, and prepare your speech and business plan around each individual personally. While you need to hit the high points that are relevant, you may emphasize the connections that your project may have with the investor’s individual background, experience and skills.
4. Transparency and Credibility
While investors are looking at the financial figures related to your operation, they also want to know that they are working with a financially sound, experienced individual. They want to know what your educational and professional background is as well as the history behind the company.
Talk about what you studied in school and how you formed your business idea. Attempt to develop personal rapport and confidence, and showcase your sincerity and commonsense. You should remain professional and poised at all times, and you should also show that you are receptive to an investor’s suggestions for improving your business plan or model.
5. Commercial Traction
Your project should ideally not be brand new, and you should at least have some pilot customers or even a small-scale launch under your belt before you seek out investors. This is because investors often do not want to invest money in an idea or concept. Instead, they are looking for legitimate ventures that have already been tested at least on a small scale.
Your plan or proposal should include testimonials from existing customers, market data feedback and analysis, and other helpful facts and figures. Remember that most investors will not know you well enough to judge your business acumen or capabilities. Therefore, they are looking for cold, hard facts to base their investment decision on.
6. Experience and Execution Capabilities
Investors want to see that you have professional experience and passionate drive for the products or services you are selling. However, they will also examine your entire team. Other people on your team may have varied levels of education and experiences that benefit your company, and your business plan should highlight these individuals with a complementary skill set.
It may even be helpful to bring some of your team members to an investor presentation. This can give the impression that you have a solid and unified presence, and some of your team members may be able to answer questions knowledgeably. However, you should remain in control over the meeting or presentation.
Investors can be very generous when they find the right investment opportunity, but be aware that the competition that you face for their interest and financial investment is significant. Now that you are aware of what investors are looking for, you can position your presentation and proposal in the best possible light. Good luck!
Author info: Eric Gordon is an independent business development and marketing specialist for SMEs. He loves sharing his insights and experience to assist business owners in growing their revenues. You can find Eric on Twitter @ericdavidgordon