There are a plethora of legitimate questions that keep entrepreneurs up at night, one of the biggest and most fundamental, being, “How do I raise money?”
There will always be a disproportionate number of companies looking for capital relative to that which exists. In order to maximize your chances it is imperative that you clearly differentiate your company from the pack.
The following four items provide important pieces to the puzzle of how to have successful investor interactions.
1) What’s your business?
Before you can begin to think about attracting investors (or customers, for that matter), you must be crystal clear on the need your business will be addressing. Too many entrepreneurs don’t take the time to put together a well researched and compelling business plan and financial model that clearly lays out the ‘why’.
WHY is your concept needed? Is it really?
Why “your” product?
What is your value proposition?
What is success?
Why will you succeed?
Just having a concept simply isn’t enough, you must understand every aspect of your business. In a perfect scenario even perform a SWOT analysis, or your own version of one.
2) The reality of being an entrepreneur: Overestimate vs. Underestimate
In general entrepreneurs tend to be way too optimistic. They tend to overestimate the good and conveniently underestimate the bad. Whether it be; market size, time to market, when profitability will be achieved, etc.
Before pitching investors, these optimistic ‘ideas’ need to be vetted and diligently researched, so you are able to defend your proposition.
Smart investors have seen enough businesses live and die to know that every concept possesses a large amount of risk, so make sure you know all of the possible pitfalls and can speak to them with confidence.
3) Why are you better?
Understand your competitive advantage and how to best communicate it to consumers. In order to clearly identify your competition and what are the most important points of differentiation,, you must first clearly identify and analyze your target market and where the whitespace exists.
In order to answer this question objectively you must clearly understand your target market and their needs :
What are you selling and to whom?
What need is your competitors not sufficiently meeting?
How will you meet this need?
The answers to these questions should drive your business’s operations and marketing, and therefore, also serve as the cornerstone of your pitch to potential investors.
4) Have Rock Stars
Investors gain confidence through seeing prior successes and use it as part of their risk mitigation strategy.
Investors are evaluating the team behind the concept just as closely as the concept itself. Having the right players involved; management, directors, partners, advisors, etc., will be the single greatest factor in your organizations future. Investors will have greater confidence about your ability to successfully execute and overcome challenges, when they see people who have been down this road before are on board.
There are no shortcuts to building a successful business, nor to securing capital. Do your research, know your market and take each step forward with a clear understanding of exactly what your goals are, how you will defend your business plan and why it is such a great investment opportunity.