How to give investors confidence in your business idea
How do you get investors all knock-kneed at the thought of having the opportunity to put their cash into you and your business idea? You prove that your business is going to be a success before you even think about approaching them. Here’s how you do that.
Get started before you seek investment
Rather than seeing investment as the point where your business can really begin, see it as a complement to what your business is already doing. You don’t need to wait until you have millions of pounds of funding to begin; a common pitfall of start-ups is dramatically overestimating how much money you’ll need when starting up.
Getting investment at a very early stage can actually hinder your business. It would mean still developing your ideas and logistics, but with the added stress of trying to meet investor expectations at the same time – not to mention the amount of time that courting investors and polishing your pitch takes up. Instead, just crack on with your business. Start small and prove there’s demand for your product / service. You can do this by launching a website and encouraging people to leave their email address as a sign their interested in what you’re going to create. If it’s a product you’re selling. Order a small batch and sell it all. You need to find a way to show there’s demand out there and then ask an investor to help you grow the business rather than help you start it. Read our guide on proving your idea can work.
Think about why you’re looking for investment
When raising investment, be sure that you’re doing it for the right reasons, as investors will pick you out a mile off if your reasons are not.
Bad reasons include:
- I’ve run out of money because I’ve managed it badly, so I need some urgently!
- I don’t know how much money I actually need so I’m just trying to stockpile as much as possible
- I don’t want to invest any more of my own money
- I haven’t been able to get money from anyone or anywhere else
- Investment’s what you need to do to make it big, right? I can’t possibly do it on my own
But good reasons include:
- I’ve researched the options available for raising capital, the pros and the cons, and I feel like we’ll be a great fit due to your other investments and the input you can give me
- I want to grow my business or take it to the next level, and I’m ready to let someone on the outside help me do this
- This investment is the best way to help me grow and develop compared to other sources of capital
Be honest with yourself about your reasons; they’ll filter through into your messaging, your pitching, and your general attitude. Desperation isn’t inviting to investors; it’s more likely to make them run for the hills.
The goal when pitching your business idea to investors is to get them to believe in your business’s success; so show that you believe in it too, and that you’re committed to doing everything you can to make it a success.
This doesn’t mean being arrogant or overconfident – it just means being absolutely sure that your business has a fighting chance. Any uncertainty or sense that you’re not completely committed to your idea will be picked up on at once.
Ensure that when investors do their research on you, there’ll be something good to find – a positive social media presence, a website, reviews. Even if your business is at a very early stage set up an engaging and professional-looking landing page that says a bit more about what your business does. Being visible not only helps people find out more about you, but also gives you authenticity – especially if your social media presence demonstrates that people are engaging with what you’re offering.
Find solutions for your challenges
Every business will have challenges ahead, whether that’s cashflow, marketing, connecting with your audience, or just about anything else. Rather than gloss over these and pretend you’re immune, think about solutions for the challenges you’re likely to face. Investors will be reassured that you’ve thought about the ugly as well as the good, and that you’ve come up with contingency plans for worst-case scenarios.
Get people on your side
Lone wolf? Try and gather your own personal cheerleading squad of mentors, fans, and recommenders. Endorsements, especially from significant figures (if you can manage it) will boost the confidence of investors. A lot of Virgin StartUp businesses have gone on to win investment, because receiving a loan from us is a sign that Virgin believes in your idea.
Crowdfunding is another way to prove that there is a demand for your product or service; if you can tell an investor that a few hundred people already committed money to your cause, it’s a very positive signal. Other ways to demonstrate interest in your product include conducting market research and getting testimonials from people who have used the early-stage product.
Be clear about your value
It’s easy to approach investors with a mindset that has you grovelling at their feet. However, if they invest in you it’s a transaction that benefits you both. Be clear about why they should invest in you. Will you be turning a profit soon? Is your business one that will help them look good or complement their other business ventures?
Pitch short and sweet
You should be very clear on your business offering and have perfected your elevator pitch; waffling makes you seem as though you’re not sure what need your business meets. Being concise and definite will give your business credibility in the eyes of investors.
Realistic financial projections
Don’t think that massively overambitious financial projections are the key to impressing investors; better to underpromise and overdeliver. Keep your financial projections based on prior information if possible, or do your research exhaustively if you don’t have any information to work from. Though you’re excited about the potential for your idea, don’t let this enthusiasm run away from you; stay modest and slightly pessimistic (only a tiny bit).
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