Cracking the investor/VC code is tough, but once you understand the formula, you’ll be able to present and pitch your business idea and funding needs to any investor group with ease and confidence.
Whether you’re founding a start-up or manning an existing company looking to grow its product line or service suite with an injection of capital, it is important to understand which elements of a business are attractive to investors. Putting any money into a company is a huge decision for somebody to make, so investors need to be sure that they are making the right choice by providing your company with capital to grow. Raising money is very rarely quick and easy, but if you make sure you’re attractive to investors, your chance of successfully fundraising will increase.
The Right Expertise and Experience – Board of Directors and Founder
Surrounding yourself with great people who have expertise and experience in your field is a sure-fire way of inducing investor trust. You should make sure that you have a board of advisors that can offer genuine advice and guidance, and can use their experience to help you avoid making mistakes that could cost investors their capital. A diverse board made up of specialists in different areas is the best to build investor trust. They want to reduce risk, so having a solid team of experienced mentors, co-founders, partners, and advisors is a great way to put investors at ease.
When I served on the board of directors for a New York City modeling agency, each person on the board had their own experience and expertise to provide guidance for the agency to grow. My role was to serve as the communications and public relations expert, while there were seven other members who served in the areas of finance, strategy, operations, marketing, etc. Our knowledge and expertise rounded out the board.
Unless you are an obviously remarkable and mesmerizing person, you should have some credentials if you are the sole founder of a company. These credentials could be a few years working in the field, but it is important to demonstrate that you have a business mind as well. MBAs are a good sign for any investor looking into a founder. If you don’t have a qualification such as an MBA, you might want to consider doing an online course or an entire online program. Expect the fundraising process to take between one and two years, which fits in with the timing of a part-time online MBA from Victoria University, that offer a unique course that’s faster than on-campus study. Individual courses in marketing, finance, and strategy can also help provide the education you need to attract investors.
Ensuring that a board is run and managed effectively can win even more confidence from investors. Having in place a solid board governance framework, and publishing it either publicly or being able to refer it to your investors can give them a sense of security that organization’s decision-makers are being held accountable, as well.
Identifying the Problem and Fixing It Quickly
The stereotypical pitch deck lays out a problem before explaining how the proposed business is the solution to that problem, but a few slides is not enough to instill investor confidence. You need to know the problem inside out, better than the solution that you are offering. This should come naturally with the months of research that it takes to prepare a business pitch, but if you can’t answer unbelievably niche questions about the problem, you probably aren’t ready to be looking for investment.
The pitch decks we develop contain the following slides: vision and value proposition, the problem, the target market and growth opportunities, the solution, revenue generation and business model, verification from market and blueprint for future growth, marketing and sales, team bios, financial projections, competitors, and fund allocation. Some investor/investment groups request figures be given as visuals, while others are fine looking at the numbers alone. Know what your investors want so you can provide them with the details in the stated format they request.
Don’t Leave Marketing as an Afterthought
Since Ries and Trout wrote the book Positioning, marketing has never been the same. You need to show investors that you understand the concept of positioning your business and have a clear position in the market or that there’s a demand for what you want to offer. You should be aware that you need to have identified a market niche that you can occupy and dominate, but in order to successfully do so, you should have a clear marketing strategy that outlines your positioning.
The marketing strategy doesn’t need to be 100 pages long; but rather it should outline exactly who your market is, how your product or service will fill the market gap, the strategies you plan to implement, how much revenue you will allocate to marketing, and how you will measure the effectiveness of each campaign. Once you have those details outlined, you can add them to the pitch deck as bullet points with illustrations (i.e., charts and graphs).
Demonstrate That You are Lean and Nimble
More essential business philosophy for you to demonstrate: you should understand what a lean business is, and why it is much more attractive to investors than having unneeded overhead. Running lean basically means that you know what your customers want, and you can deliver to them exactly what they want with minimum wastage. You are strategic with investment dollars and only allocate funds where needed.
If you are a company that sells bikes for extreme sports, make sure your bike can withstand a lot of activity and fulfills the exact needs of the users. Will they need a bike to have bells and whistles? No. You should have a product without unnecessary bells and whistles, which you can demonstrate that people want and need. After you’ve proven your concept and that a market exists, then you can invest more funds in optimizing and enhancing the product and spend more money on marketing. But being smart, strategic, and scrappy in the beginning are the best ways to test and scale your business.
Get Feedback and Have Outside Opinions from Objective Third Parties
Even if your company is just an idea, it is important to get some authoritative voices pitching in, whether it is being mentioned in an editorial or an article that you can show investors, or whether it is having a commendation from an independent expert in the field stating that your idea is viable and promising. It can be tempting to ignore the importance of generating buzz and media coverage but having outside opinions can be a great boost to investor confidence.
Make sure your business or startup is on Crunch Base and use tools such as AngelList and Unicorn. Make sure you have clear public profiles that show off your product and clearly explain who you are and who all your team members are, including their experience and their strengths. Make your positioning and branding clear, even if it is very basic. Additionally, you’ll want to try and secure media coverage in relevant industry trade publications as well as mainstream business press. A third-party endorsement in Forbes.com or WSJ.com will go much further to investors as it will show a proof of concept and that the media is interested in covering your brand.
Have Audited Financials and Projections
If you haven’t already worked out that financial models are incredibly easy to manipulate, you probably haven’t built a financial model. If you have a good financial model that you think is worthy of investors’ trust, give them a shortcut to developing that trust by validating your numbers with a reputable accounting firm or tax law firm. They will be able to produce a list of assumptions that investors need to know about your model; when this list is produced by a trusted source, investors will have a good idea of the inherent risks involved with the investment.
A Professional Presentation
The content of your pitch is the most important thing, but that doesn’t mean you should completely ignore how your pitch is presented. The pitch itself is yet another opportunity to prove the skills and professionalism of your staff, and that should shine through.
You can use a presentation design company to help you plan and design the presentation accordingly. This way, you can offer all the information you need to shareholders in an attractive, logical manner. This proves that you can handle a variety of tasks and gives them one more reason to trust in your competence. Remember, investors are investing in people as well as businesses.
The pitch shouldn’t be too long, although it shouldn’t feel unfinished either. While it’s beneficial to have a fairly attractive presentation, the most important thing is that it’s easy to understand and follow. Every point should be clear as glass, so your investors know what questions they need to ask and where you stand on the important points.
Insurance
Having business insurance can make your brand appealing to investors since it shows that you have a risk management policy. Assessing the financial strength of insurance companies is crucial when weighing your options. A broker with a robust financial standing will be able to provide sufficient cover when your business incurs large scale losses. That said, You can find the right insurance company by considering this factor. For example, if you are planning to sign up for an insurance policy with companies like Primerica, you may want to check Primerica reviews to understand their financial strength. Many insurance company ratings are based on amount of cash at hand, diversity of revenue stream, risk management protocols, and debt ratio.
