Nine out of every 10 start ups fail. Awful… but it is true! This discourages the investors to make investments in start ups. With the changing passage of time, market and investor’s mindset is also changing. Investors are the nurturers of the venture. But it is quite hard to insist any investor to make the investment in your venture or start up. They make a keen observation; look for new opportunities and innovative ideas before making any investment in any company.
Here is the list of some tips that may end your search for getting a good investor for your venture or start up?
What investors look for in your venture or start up?
There are various factors which investors take into consideration before investing in any venture.
#1 Potential for a high return
Investment involves a high degree of risk; especially in the start up business. All they look is for the maximum rate of return on investment. A leading expert on investment and renowned professor of Carleton University, Allan Riding states, “For every dollar that an angel puts into a company, he or she would like to take seven dollars out, after taxes, in seven years.”
#2 A good reason to invest
Most of the investors enjoy the thrill of helping to create and make a thriving enterprise. Show them your knowledge for the market, unique and innovative ideas, growth and scale of your business, high future return of their investment in your venture, your market competitors, and product and services and induce them to make an investment in your venture or start up.
#3 A well experienced and capable team for management
A good management team is the pillar of a successful venture. It is important for every company to have a well experienced, skillful, solid and capable team for management with leadership ability. Investors make themselves assured that the business and investment is in the hand of experienced, trustworthy, knowledgeable, and competent people.
#4 An effective business plan
Investors want to see a solid, convincing and complete business plan. Make proper research and develop a vision for your venture. They also look at detailed marketing plans, the scale of your start up, portfolio diversification and financial projections.
#5 Exit strategies
A viable exit strategy is also an important factor that investors usually considered. Before investing in your start up or venture, they inquire about the exit strategies.
Give them reasons to invest in your start up or venture
Following is a small list of some points that may induce investors to invest in your venture or start up;
#1 An alluring management team
For many investors, the management team is more important than the product or idea. They always inquire for the right set of experience, skills, temperament and drive for the proper growth of the business. Furthermore, investors surely anticipate the following questions;
- How many employees a company owns?
- Who are the founders of the company?
- Who are the key managerial members of the company?
- What is the reason that makes the team uniquely capable to execute the business plan of the company?
- What inspired the founder to start the company?
- What are the plans to scale the team in the next 12 months?
- What domain experience does the team of the company hold?
After making a judgment about the founder and the team members, investors think to make an investment.
#2 A scalable business
Investors always look that for a big market opportunity. They want to invest in such business, venture or start up that are scalable and become meaningful in the future. Make sure not to present any small or incompetent idea to your investor. Real and sophisticated investors will always look for signs of high growth on even minor incremental costs. With the help of strategic planning, investment in start ups may prove to be a profitable venture. Moreover, by paying attention to those companies who are developing new trends and ideas and bringing high value may induce the investor to make the investment.
#3 Portfolio diversification
It is not good to put all your eggs in one basket! So applies to investment strategy as well. There is always a certain risk involved in every business. None of the business is secure, but by diversifying the investment, you can reduce the amount of loss. Portfolio diversification will reduce the chances of taking a loss; to an extent, and increase the opportunity for a return on investment. It balances the financial risk with financial gain. As everyone knows that startup ventures are quite risky by nature. But involving them to the portfolio such as bonds, stocks and mutual funds may reduce the risk.
#4 Be a seller
Do not forget that you are a seller and considered the investors as your buyer! You must try to develop a selling investor pitch and business plan. For this, all you need is to show them your knowledge for the market, growth and scale of your business, high future return of their investment in your venture, your market competitors, and product and services.
#5 Job creation
Undoubtedly, startups and ventures support the economy and create employment. According to a record provided by the Bureau of Labor Statistics, start ups offered 1.7 million job opportunities from March 2016 to March 2017. Moreover, start ups are also not majorly affected by economic downturns as compared with other running companies. However, older companies cut jobs and close the job opportunity during the economic crisis.
#6 A promising future
The best thing you can do for investors is funding the future. This will not only promote an ever evolving world with new innovations but it will also allow you to be a part of something bigger.
How to attract investors for your venture or start ups?
- Start researching by your own
- Prepare a well market research
- Be realistic in your pitch
- Make the best searching at your level
- Learn from your failures
- Know your business
- Show your interest and passion
- Give a chance to participate
Frequently asked questions by investors?
- Does the company have the great management team?
- Is the market opportunity vast?
- What is the positive traction that the company has achieved?
- Is the founder of the company passionate and determined?
- Does the founder get the financial and key metrics of the venture?
- What are the potential risks involved in the business?
- What makes the company or start up different from others?
- Where will the company use the investment?
- What will be the growth of the venture with that capital?
- Is the expected valuation of the company realistic?
- Does the start up venture have unique and innovative technology?
- What are the intellectual properties of the company?
- What are the exit strategies of the venture?
- Are the legal compliances clear?