Investing in a startup can be a great way to get involved in something new and potentially very lucrative. However, it can also be a risky proposition. This is because investors are always looking for a return on their investment, and they want to make sure that they’re putting their money into a company that has a good chance of succeeding.
However, there are a few things that you can do to increase your chances of gaining from an investment. Here are a few ways that you can help your startup gain the investments it needs to be successful.
1. Soft Selling Through Networking
Networking is usually the number 1 tip that veteran entrepreneurs tell newbies when it comes to finding investment. This is because, through networking, you can soft sell your ideas more naturally and organically. Now, what does this mean? Nobody likes getting approached aggressively for sale, but with networking, you can do this in a much less formal way.
On the surface, it can be awkward for many, but that’s nothing when you learn some conversational tips on the side. Good conversation skills are already enough when you’re trying to soft sell. Keep the conversation going, and if they show even a little interest, then you can go from there. Always remember to be all-natural.
2. Pitch A Return On Investment
Even though an investor is seemingly interested in your business idea, an investment for them is a means to an end. This means they won’t latch on to your idea entirely if you don’t discuss the return on investment (ROI). After all, it’s all about profitability, and an investor would want their money back and more.
That said, whether you’re pitching to a venture capitalist firm or your angel investor uncle, you need to show them the profitability of your business and how they could gain from it. Of course, as business owners, it’s always tempting to talk about your business model and revenue. But at the end of the day, the most important thing an investor wants to know is what’s in it for them.
3. Join A Startup Accelerator
For a first-time business owner with no direct connections to a venture capitalist firm or who doesn’t personally know an angel investor, a startup accelerator would be a massive help. However, everyone should start somewhere, and if you’re an entrepreneur looking for investments, a startup accelerator should be the first on your list.
From beneficial mentorship to working out your business model, joining an accelerator is a massive boost if you want your startup to take off. While it doesn’t immediately guarantee that you’ll land an investment, it’s still a pretty good addition to your business, as it can entice investors to look at your business.
In short, it makes your startup more appealing to investors.
4. Present A Forecast Model
One of the things that investors like to see is a detailed and scalable forecast model. This is so you can show your investors that not only have you forecasted your business’ growth, but you have already planned for it. Of course, you should also show them how your business model will prove profitable in the long run. You can also show them the predicted financial and market issues that may concern your potential investors.
Also, a reasonable forecast model proves to your potential investors that you have already determined how and how well your business will work in the market. This will keep your potential investors interested in your startup and let them know how transparent you are with your business.
However, you should never forget that forecasting is an ongoing process, and it always needs reassessments from time to time. So make sure you’re presenting a model that is as accurate as possible. The more updated your projections are, especially with the constant flux of the market, the more impressed your potential investors will be, making them more enticed to give your startup investment.
5. Be Ready With Your Capitalization Table
Speaking of transparency, one way to do that is always to be prepared with your cap table. A cap table presents all the equity and ownership of the various investors or lenders in the business. Yes, lenders, you can lenders equity as collateral for a loan. This is usually in the form of business loans that you can get from lenders like CreditNinja.com.
A cap table is crucial for investors because they will see how they can be a part of the company as a founder. This will also help them gauge their profits in the future and how their equity will be worth it in the long run.
Looking for an investment can be challenging, especially if you don’t know where to look and how to make your startup enticing to investors. That said, by following the ways we’ve outlined, you can have a bigger chance of landing one shortly. Remember, the more prepared you are, the more your chances will be.