Securing investment in your start-up can be scary, nerve-racking, and a downright rollercoaster of emotion. When you do manage to secure an investor, it can also be one of the most exciting and exhilarating experiences for a founder. Finding someone who believes in you and your project enough to invest is a great milestone in growing your start-up.
8 Actions to Secure an Investor for Your Start-up
These eight actions are an absolute must for anyone looking to secure an investor for their start-up:
Define Your Strategies for Your Market, Product and Team
Sounds simple and silly, but this shouldn’t be overlooked. Write out your business plan, draft out your brand brief, think about the market, the product or service you’re offering, and if there’s real money to be made. Evaluate your team; are they a gaggle of passionate people with no clear direction or are they polished professionals, with milestones, KPIs, and a drive to get your business off the ground?
Support Your Business Plan with Your Financial Forecasts
Forget back-of-the-napkin scribbled guestimates, your business plan needs to have a clear set of numbers supporting your strategy. Do your financial forecasts show your company making money? Can you demonstrate with your projections that your company is profitable in a sustainable way? Can you separately show an investor your cash flow forecast? Without numbers, it’s much harder to secure an investor.
Build Dynamic Financial Projections
Your financial forecasts are dynamic, responsive, and strong enough to handle all kind of adjustments an investor might make. Investors will want to see what happens when your business costs are higher, the market conditions change, and a worst case scenario hits. Can your financial projections handle that? Do you know your peak-cash-need? Do you fully understand your financing options? Can you adjust your financial model and still be able to understand what all the numbers mean? You must be confident at handling your financial models and presenting them to an investor.
Prepare Relevant Documents for Your Investors
Whilst business plans may be a simple 10-page PowerPoint, you’ll be unlikely to find an investor that shows more than interest after sitting through such a bare presentation. You need to make sure you’ve prepared all the documents your investor may need to perform their due diligence. That should include financial forecasts (profit & loss statement, cash flow, and balance sheet)), your business plan, a video pitch and a slide deck made specifically for pitching to investors.
Define Profiling Criteria to Select the Right Investors
There will be hundreds of investors to choose from, but finding the right investor for your business is key. Write up a list of your dream investors, then work through that list and try to understand why they appeal to you. Next, write a list of key criteria that must apply for when you search for investors for your company. Make sure your criteria are reasonable, realistic, and practical. Define and search strategically.
Set up a Process to Address Multiple Investors at Once
Sending out mass emails and keeping a poor record will only make a bad impression and struggle to secure an investor. Find a way to address multiple candidates at once. Make sure you keep track of what is going on and where each investor is in their journey with you. This way you’re always in touch with them and can anticipate what they might need next.
Understand How Different Company Valuation Methods Work
Different companies will be valued at varying amounts and different valuation methods will also affect valuation too. Understanding how each valuation method works will enable you to apply these methods to your own start-up. You’ll have a better idea of the changing value of your company, which will likely fluctuate across different methods.
Understand the Valuation Range for Your Company
Once you understand that company valuation methods vary, and the valuation outcomes vary too, you’ll be able to under the valuation range of your company. You’ll be able to place your company’s value on a scale and become less attached to a single fixed numbers. You also won’t be caught off-guard if an investor says they think your business values at a lower benchmark than where you’d placed it.
Use Software to Secure an Investor for Your Start-up
Bagging an investor can be stressful, so we recommend that you use software to help you. There are some good options available. For all your financial forecasts and cash flow data, you can use programs to save, sort, and present all your data. Get pitch-ready forecasts, market analysis, and sensitivity tools and demonstrate to your investors that you understand your market and your company’s forecasts.
