For many startups looking to grow their business, attracting potential investors is crucial. Early in my professional career, I realized there was no proven route to securing investors. Just like every other aspect of running a business, it requires a bit of patience and a lot of hard work. Networking absolutely helps when attempting to secure an early investment, but you can’t meet everybody in one day. That’s where the patience comes in. In most cases with investors, they want to see a proof of concept before diving in.
Building up a core customer base and establishing a solid foundation is vital. Think of it like a garden. You need to plant the seed in the soil and get the plant to start sprouting a bit before an investor joins, that’s where the hard work comes in.
Tips For Businesses Trying To Attract Investors
Throughout my professional career, I’ve been able to hone in on five key tips for attracting investors that I love sharing with other entrepreneurs. The first and arguably most important tip is focusing on the customer. Make an effort to speak with every customer in the store and ask them about their experience. Make sure they walk-out believing that every effort was made to provide them with a pleasant and memorable experience. Customers are often fantastic early investors as they’ve already had a chance to build a level of trust and belief in not only your products and process – but also in the people who make up your organization – you, your partners and staff members.
The second tip is thinking like an investor. Take the time to consider what questions you would ask a potential business owner if the roles were reversed. When I was getting ready to meet with investors, I stood in front of the mirror and asked myself a ton of questions about my business. I tried to think of different questions about my business plan, products, shipping operations, and anything else I could come up with. I wanted to be sure I could answer any question that may come my way.
Number three, be prepared to eloquently explain your story. What drove you to start your company? What motivates you to put in the hard work necessary to grow a business? What problem are you attempting to solve? Every organization has an origin story so be prepared to tell yours.
The fourth tip is understanding why you need the investment and a detailed plan outlining what you’ll do with it. Every potential investor will want to know exactly where their money is going and how it will help your company. Investors want to feel secure that you have a clear vision for the growth of your company. The final tip is being a reliable partner. Like every relationship in life, trust is key. Investors want to know that you are someone that follows through with their promises. Stick to your word and prove that no matter what, you’re a trustworthy and honorable person.
- Focus On The Customer
- Think Like An Investor
- Be Able To Tell Your Story
- Have A Detailed Plan For Investors
- Be Reliable
Numbers that Matter Most To Early Investors
One of the most important aspects of running a business is knowing your numbers! The numbers that matter most to an investor who is looking at your business will vary based on whether you’re a startup or an existing business. Early investors are not as focused on how much revenue is being generated at the start. More importantly, they want to see that you understand how those numbers correlate to your business. What’s your presentation of the numbers? Why are your numbers the way they are? How can those numbers change over time? How can their investment enhance those numbers and the profitability of your business? These are the numbers that early investors will focus on. So, be prepared to provide a detailed analysis, showcasing your knowledge on all phases of your organization.
Do Not Get Offended By Investors
Most investors will want to take a look at your books before investing. Frankly, who can blame them? Before I write a check, I want to be sure that the information I’m getting is accurate. Try not to take it personally when investors start doing their own research. They may ask to see financial statements, speak with employees, speak with your accountant or financial advisor to review tax and bank statements, etc. It’s a natural feeling to slightly pause when asked by investors for this information, but remember it’s not for a lack of trust. Investors have every right to do their due-diligence and analyze the numbers before committing their money.
There’s a very good chance that investors will take a look at your numbers and come back with more questions. In some cases, a question may be posed simply to gauge your passion and conviction toward the business. A good old-fashioned debate can lead to healthy discussions about operations and further highlight your confidence in the future of your organization. Investors love confidence – but they hate arrogance. So keep that in mind when answering questions about your business. As an investor, I would want to know that the person I was investing in was willing to take feedback, constructive criticism, and be open to new ideas. Even if you don’t entirely agree with an investor’s suggestion, they want to know that you’ll be open and willing to listen.
Things That Attract Me To Investing In A Business
One of the biggest things that attracts me to a business is the people – the owners and managers as well as the staff members. I like to get to know them, find out what makes them tick and why they started the business in the first place. Sometimes, I’ll ask questions that are more clinical and academic in nature to check certain boxes. Other times, I like to ask more personal questions about their upbringing or home life. Sometimes I’ll ask a question that probably shouldn’t be asked. But I want to understand philosophically how they look at things and the reasons why. Understanding their philosophical approach gives me a better idea of how someone processes information and what drives their decision-making. Every business has some down days. Understanding how they approach people on those down days will give me a clearer picture of how they will handle a bigger crisis, if and when it arises. I want to know exactly what kind of leader I have philosophically and not just financially.
What To Look Out For When Looking For Investors
There are a few things I look at when I’m considering investing in a business. Is this person passionate about their business? What’s the quality of their character? Do they have a thorough understanding of the numbers? All of these things matter. Right off the bat, I want to see if we share an alignment of goals, strategies, and incentives. I need to be sure that the partnership isn’t lopsided because that can lead to mistrust on both sides down the road. Finding a business partner is a lot like dating. It can’t be a one-way street. This means that when I invest, I want to know that I’m truly bringing something to the table and I’m being valued. Do you have a plan for what you will do with my investment? Nobody wants to sign a check and walk away and forget about it. I want to invest because the other person is looking for a mentor, uses me as a resource for problem solving or connecting with others, and has a clear path for how my investment will further grow their company. These are just a few examples of the things that excite me as an investor, aside from generating a profit. It also makes an investor feel like a bigger part of the company, resulting in a greater sense of pride in the organization and partnership.
All investors want to feel like they’re really a part of the team. This doesn’t mean that you need to walk them through every single daily decision, just remember to keep the lines of communication open. Be honest about your goals and open to feedback at all times. Open communication is the key to building a harmonious partnership, leading to greater success for all. The right investor will elevate your organization and support your vision for the future. These tips should help guide you toward the perfect partnership for your business.
- How will you attract potential investors?
- What do you look for in potential investors?
Morgaine, B. (n.d.). 11 foolproof ways to attract investors. Retrieved from https://articles.bplans.com/11-foolproof-ways-to-convince-people-to-invest-in-your-business
Martins, A.T. (n.d.). 15 tips on how to convince investors to invest in your business. Retrieved from https://www.profitableventure.com/convince-investors-invest-business/
Paying more attention to your customers than your people, can be a big mistake. These tips can help you capitalize on your human capital.