Launching a new business can be a daunting challenge but it can also be incredibly rewarding. One of the first things you need to do to give your company a solid foundation for growth is to secure funding. Some people do this by securing bank loans while others rely on crowdfunding.
Another option is to approach a venture capital firm. Although it is a difficult process to find the right investor and convince him or her to take a chance on your company, it is one of the most rewarding finance solutions. The experience and networking connections a venture capitalist has to offer will prove to be invaluable. Here are five tips for attracting the right investor.
Know Your Audience
Before you approach a venture capitalist, it is important to do plenty of research. Different venture capital firms have benefits to offer. If you choose to pursue this avenue of financing for your business, it is vital to approach a venture capitalist who is interested in your business type and has room in his or her portfolio.
For example, the venture capitalist firm S-Cubed Capital, managed by Mark Stevens, specializes in investing if companies within the sports management, technology, real estate and philanthropy. If your business falls into one of these categories, it may be a good fit for the firm’s portfolio. However, if your company sells a different type of product such as food or clothing, you may benefit more from partnering with a different firm.
Create a Dynamic Pitch
Potential investors decide if they want to fund your business based on your pitch. You can have a fantastic business plan but fail to attract attention from investors if you have a boring pitch. Similarly, an engaging pitch can sometimes convince investors to take a chance on a new company even if it doesn’t have a well-thought-out business plan.
Your best chance of securing the financing you need, however, is to combine a dynamic pitch with a great business plan. Create a pitch that tells a story and caters to the interests of the investors you are talking to.
Memorize Your Statistics
After you make your initial pitch, investors will have a lot of questions about your company’s business model. You should be prepared to answer these questions quickly and accurately.
If you don’t know the information or you have to bring along flashcards to remember it, you will seem like an unreliable CEO who is too much of a risk. Investors will be impressed if you take the time to memorize your company’s important statistics. You should be able to have a conversation about annual revenue, expenses and projected profits.
You also need to know what you expect from the meeting as this better allows you to negotiate with the venture capitalist firm. You most likely will not walk away with exactly what you asked for in terms of equity or investment so you need to be prepared to negotiate.
Have a Philanthropic Company Culture
Investors love companies that are committed to giving back to their communities. You can incorporate a philanthropic culture into your company from an early stage and investors are more likely to be attracted to your business if it gives back in some way.
You can do this by donating either time or money. Having a monthly workday set aside for your employees to volunteer with an organization the company supports is one great way to accomplish this goal. You can also donate a set amount or a portion of your profits each year to a charitable organization.
If your company is new, limit yourself to supporting one cause but if you are already generating a steady revenue, try diversifying your donations to make an even bigger impact.
Develop a Good Business Plan
You can have a fantastic business idea with a philanthropic culture and a dynamic sales pitch, but if you don’t have a solid business plan in place, you can’t prepare your company for sustainable growth. Venture capitalists are prepared to help companies grow quickly but you need a business plan to maintain that momentum.
You should know how and why you will spend the money you receive from investors. You also need to identify your vision for the company so you know how you want to grow it. Including this business plan in your pitch will make you seem more prepared to investors.
When you decide to approach a venture capitalist to secure the funding your business needs to thrive, you may be intimidated by the process. These high-profile businessmen know how to recognize smart business ideas and can catapult your company into success but you have to make your business look attractive to them.
Use the six tips to make your business look more appealing to potential investors so they are willing to take a chance on you.