Investors are generally risk takers, it’s part of the job. But that doesn’t mean that they are reckless, far from it. Startups need to convince investors that their business is worth taking risks for, by stepping up their game to gain a competitive edge against other contenders.
With the effects of Covid on the economy still hanging around, you should ask yourself how your startup will cope with the uncertainty? And can it go with the flow and adapt with unseen situations?
It is important to figure out how your startup will attract investors, as well as how you, as an entrepreneur taking the big leap, will get their support.
Here are six ways to help your startup attractive to investors:
1. Learn about Your Industry Inside and Out
It is important to know the industry, to which your startup will contribute to, throughout. This allows for an advantage when pitching your ideas to investors, as you will be able to answer all of their questions and doubts.
It is not only fundamental to know your own business industry, but knowing your sector inside and out shows your potential investors that you are on top of the information you will need to succeed. It will also give you the confidence to pitch your business when you have deep knowledge of your business in the context of its sector.
This will also give you the confidence to know how your startup could potentially be a game changer in your chosen industry, making it easier for investors to make a decision.
2. Create A Solid Business Plan.
Your business plan is an important document that demonstrates to investors that you are thinking of the future and have covered all your— and their—bases.
Your strategy should clearly express your company’s goals and aspirations, as well as the expertise of your employees.
The business plan should demonstrate a solid understanding of your customers (target market) and provide a clear description of the products or services you offer.
Creating a solid business plan is a good start to giving your investors the push they need to go to the next stage of investing in your startup.
3. Build A Detailed Cash Flow And Financial Plan.
Don’t forget that investors are astute people. They will want to see how you will manage the funds that you will raise and where it will go. It is vital for them to know if you have backup plans in place to mitigate financial losses.
They will want to see if their ROI (Return on Investment) will be worth the risk they are taking. So, do your research, study all possible scenarios, and build a detailed cash flow and transparent financial plan.
4. Create a Forecasting Model
A Forecasting Model is of great importance for businesses, it is used to predict the outcomes of different scenarios in for example; sales, supply and demand, and consumer behaviour.
Creating the right forecasting model for your business will target your desired investors. Setting up a realistic forecast will be beneficial to the future of your startup, especially when pitching it to investors to gain funds.
Keep in mind that forecasting is a continuous process that needs frequent reevaluation. You’ll be better equipped to make educated strategic decisions for your company if your predictions are up to date.
Prepare an outline of how you intend to meet your targets. We suggest that you consider presenting both conservative and aggressive estimates to demonstrate alternative assumptions to your investors. This will also show your investors that you are adaptable and think of the future.
5. Know Your Target Market.
Knowing who your target market is makes it easier for you to create the right pitch, plans, and strategies to keep your startup attractive to investors.
Furthermore, it will give you the advantage of knowing exactly what problem your startup is going to solve for the target market. You get to know what will lead them to benefit from your products or your services.
Once you know your target market, it will be your responsibility to come up with creative solutions for how to create value for that market.
Your strategy regarding your target market is important to your investors as they need to know that your startup will be capable of attracting the right market for your services or products.
6. Do your Legal Due Diligence
Interested investors looking to invest in your startup will undoubtedly have a lawyer or two on hand to do a thorough legal analysis. While complex, the legal due diligence approach serves as the final check on all legal aspects of your company and team.
It is important that you do your homework, make sure that your startup is legal and compliant with all relevant regulations
“Learning to embrace and savor rejection is one of the best things that entrepreneurs can do. Launching a startup is the time to find your ever-optimistic inner child again.” ― Alejandro Cremades, The Art of Startup Fundraising
Launching a startup is not easy, and if there is one thing you shouldn’t lose—it’s optimism. Follow these ways and you’ll be a few steps closer to attracting the right investors for your startup business and go from there.
Remember that failing once doesn’t mean that you are a failure, failure is merely one of the steps to achieving success.