Finding funding is typically one of the most challenging parts of starting a new business. The risks versus rewards of investing in new companies can usually have investors worried about jumping in. The responsibility is then on the entrepreneur to make their business idea exciting and attractive enough to warrant investors’ attention.
No matter whether the funding comes from friends, angel investors or venture capital firms, the entrepreneur must have a clear strategy for obtaining this funding. To help, these eight leaders from Young Entrepreneur Council offer some strategies for persuading someone to invest in a new business.
Young Entrepreneur Council members share tips for how to entice business investors.
Photos courtesy of the individual members.
1. Focus On Getting Results
The more business results you have, the easier it is for investors to give you funds to grow your business. So if you’re just starting, I’d advise you to build your product and sell it. For those who have just started selling a software-as-a-service (SaaS) product, consider consulting as an alternative business model to raise funds to improve your product. Don’t hop on the fundraising train before having a decent product with proof that people want to buy it. And finally, remember that as a CEO you’re the chief builder and seller in your company. You sell your products and services to your customers. You sell your company vision to your employees, and you sell passion, riches and self-importance to your investors. – Samuel Thimothy, OneIMS
2. Create A List Of Their Objections
One way to feel more confident and to convince people to invest in your startup is to come up with a list of their objections. Think of all the reasons why they wouldn’t want to invest. Then, go through the list and find answers to their potential objections. Being prepared for possible questions and concerns will help you respond to them well in the moment. They’ll also find your confidence and readiness impressive, which will make them more likely to invest in your business. – Blair Williams, MemberPress
3. Soft Sell Through Networking
When you first start out, it can be daunting to think about the funds you need and how you’re going to get them. But an easy way to start is to soft sell through networking. Networking is a surefire way to get your business out there and let other professionals in your field know about your brand. Networking events are great opportunities to meet other people in your industry, learn tips and introduce your brand to the right people. The right soft-sell pitch can lead you to a deal with investors you otherwise wouldn’t have had. – Stephanie Wells, Formidable Forms
4. Offer A Stock That Pays Dividends
Offer a stock that pays some dividends so that your investors get cash flow instead of just long-term equity. The immediate rewards, in terms of dividends, and a well-designed package, make the investment much more attractive to your potential investors. Be specific in the amounts invested and projected dividends in your package and be sure to take the time to show sample reports. Investors want to see fail-proof investments with immediate, as well as long-term, returns. – Matthew Capala, Alphametic
5. Be Completely Transparent
Getting investment from friends and family requires complete transparency. You don’t want to ruin relationships with loved ones because an idea didn’t work out the way you planned. I suggest reaching out to friends and family interested in your idea and giving them your pitch. If you get positive feedback, take some time to talk about your company’s status and your future goals. Keep them updated based on a predetermined schedule (weekly, monthly, quarterly) so they can see and understand the status of their investment. – John Brackett, Smash Balloon LLC
6. Approach Government Organizations
Remember to approach government-based organizations that specialize in helping local businesses and small companies grow. They often have connections and resources that can point you in the right direction even if they can’t help you with your specific investment needs. When you get guidance and information from officials whose jobs it is to support the economy, you’re likely to meet the right people and improve your chances of getting funding. – Syed Balkhi, WPBeginner
7. Create A Persuasive Pitch Deck
I can’t emphasize more the importance of presentation. The majority of your success in getting people to invest in your idea depends on the visuals of your presentation. So take enough time to put together a persuasive pitch deck. The focus should be more on the founders and the company, so avoid using text-heavy slides and keep the visual graphics to a minimum. Keeping that in mind, you should have a short presentation version so you can speak for some specified duration and explain your idea and model to potential investors, and the rest depends on how you break down the complex concepts using graphics and charts. Creative skills are a plus, as those angel investors have seen thousands of pitches and intuitively they know the industrial standards. You can also get professional help. – Vikas Agrawal, Infobrandz
8. Start With One Key Seed Investor
As a VC I’ve seen more pitches than I know what to do with. The best strategy for fundraising I’ve seen is to start with your one key seed investor. Focus first on getting a cornerstone investor. Obsess about who they are and what they bring. Then go find them. Once you find that person who can help you open doors and be a reference to you as a human, the fundraising moves along much easier. – Codie Sanchez, Contrarian Thinking & Entourage Effect Capital