In the early days of starting up a business, it’s common for entrepreneurs to accept any money that comes their way.
Yet, this can backfire if you end up working with investors who have a different agenda than you do. An investor-entrepreneur relationship is ideally a long-term one; so it’s important to craft a pitch that will entice not just any investor, but the right investor for your brand.
Raising funding is time-consuming, but can really pay off when the time comes to grow your business. So how can you tell if an investor has your best interests at heart? Although there are no guarantees in business, a bit of organisation and research can go a long way.
The ideal investor
Before putting forth a great deal of time and effort into fundraising, it helps to narrow down what your target investor looks like. Rather than going with the first offers that are thrown your way, you want to pause and ask questions to determine whether the investor has goals in line with your own.
Investors are more than just faceless sources of funds; they’re partners in the business. A good investor will serve as a mentor, providing advice and networking opportunities in addition to capital. They can introduce entrepreneurs to other investors, vendors, and clients. Yet at the same time, an ideal investor isn’t overbearing. Good investors know when to step back and let the entrepreneur take charge.
Attracting the right attention
There are a number of marketing tactics that can be used to attract the attention of worthy investors.
Social networking sites like LinkedIn become a vital tool for attracting potential investors, as have crowdfunding websites like Kickstarter. Trade events, contests, public fairs, and other community events can allow you to reach out and speak to investors within your own community.
No matter where you choose to network, it’s important to refine your pitch. Show a clear potential for return on investment. Investors aren’t interested in taking a shot in the dark; they want to see facts that prove their investment will turn a profit.
You may have a great product, but if you don’t know how to create a workable financial plan you will have difficulty getting it off the ground.
Proper planning can enhance the chances of finding the right fit. The investor should have confidence in your figures and the market opportunity.
Questions to ask every investor
As mentioned above, potential investors will do their research to determine whether your startup is worth their time and money.
You have the right to ask questions as well to determine whether or not you would make a good team. Don’t be afraid to ask for references, including other CEOs that they have backed in the past.
Find out how they provide support that goes beyond the financial realm, and what their experience is in relation to your company.
Finally, ask what excites the investor about your company to get a clear indicator of interest and resources.
The bottom line
By taking the time to do your homework, create a viable business plan, and reach out through multiple marketing channels, you can increase your chances of finding the right investors.
With a strong team behind you, you’ll stand a better chance of increasing profit for all parties involved.
Rachel MacDonald is a Glasgow-based freelance writer with a background in marketing and the arts. She has worked as a copywriter for businesses spanning the globe, and has contributed guest posts to a multitude of business, travel, and lifestyle blogs.