Do you need to find an investor for your startup or small business? Fundraising is not an easy feat. Since most entrepreneurs are novices when it comes to pitching investors, it’s important to start with the basics and learn how to select the best investor for your business.
So, we asked eight entrepreneurs to share their insights on how to select the best investor and here’s what they had to say:
1. Make sure your goals are aligned.
“Ensure that you and your investor’s goals are aligned. Investors like to invest in companies that have markets, business models, or technology platforms that they are familiar with. This familiarity can come from previously investing or working with companies within their portfolio. Once you identify investors that have similar goals, reach out to them and establish a relationship. They should be more willing to listen to you once you have done the research and identified that you have similar goals.”
2. Carefully screen investors.
“The art of attracting investors depends on one’s ability to screen them. Most people are skeptics, but a skeptic without information is ignorant. Moving beyond ignorance is a process that demands time, energy and intelligence. So when I’m bringing in investors, I am clear and concise with them about what I am doing, what I am asking them for, and what they can expect. I require them to do their reasonable level of due diligence, as well as be comfortable with the project, before I take any investment dollars.”
3. Connect with investors inside your target market.
“Identify investors whom your product or service directly relates or affects. If they can use it and see a value in their daily life then they will be an intelligent investor who understands your business in a more hands-on way. Our largest investor is heavily involved in CrossFit and lives outside the US. His excitement came when we were able to show how [our business] can be applied to CrossFit groups he is a part of and how it could then translate to other organizations he is associated with internationally.”
4. Bootstrap before selecting investors.
“Bootstrapping is an amazing option for entrepreneurs who aren’t sure about external investors, as you can build something with relatively few capital resources and iterate for quite a while to find product market fit. If you do this before taking on serious capital, you can be more certain that your idea will work and to what degree. This also puts you in a position of greater control. I’d argue it’s better for all of those involved with the company long-term for the founders to have voting control. Now, if you choose the bootstrapping path, be prepared, it’s no easy task and not for the faint of heart.”
5. Tap personal connections and grow your network.
“Grow your personal network by attending networking events, joining your local chamber or special interest groups, and reaching out to fellow alumni from your university. Don’t just sit on business cards, but make the effort to build real mentor and advisory relationships with people you meet. Investors look to invest in people rather than just ideas, so you’re much more likely to find the right investor by having someone refer you or building a relationship with someone who might be in the capacity to invest down the road. I can speak from personal experience, as we were able to raise a six-figure round of seed funding to launch our company last year while I was still in college. This was possible because of a personal connection I had made on campus a couple years before.”
6. Find an investor who can add real value.
“Choosing an investor is incredibly important—you want an investor who not only has the money to fund your business today but can also support your future growth. A great investor will ask you questions that make you think differently about your business. He or she will be as easy to work with when times are good; as they are when times are bad. You shouldn’t pick investors who will be your friends or who are just along for the ride; you want investors who are going to make your company more valuable through their insights and networks.”
7. Attend conferences and meetups.
“[Attend] conferences or meet-up events for entrepreneurs, advisors, VCs and other investors. Some conferences that are great for one-on-one meetings between entrepreneurs and investors include The Hatchery’s annual “Hatch Match” and Global Entrepreneurship Week, which is held throughout the world multiple times a year. As a business owner, if you want to impress an investor, keep your pitches short with clear points. State your case (and why it’s the best case), point out why you love doing what you do, what your business is all about and why you want the investor to be part of your future plans.”
8. Prepare a relevant pitch deck.
“The best way to attract right investor is to spend time figuring out what the right investor looks like for your business and vision, then prepare the information that they would want to see. After you have the profile and the information you comb through your network to get an introduction to these kinds of people if you don’t know any personally.”
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