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10 Tips to Convince Investors to Support Your Business

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Funding is one of the biggest hurdles a brand-new business will face. It’s difficult to even get in the door with a potential investor, but what happens when you finally, finally have that coveted meeting? The pressure is on, and you'll need a rock-solid contingency plan.

Investors get bombarded by cofounders and small-business owners all day, and clearly, they don't just throw their money at everything, or there wouldn't be so many startups in Silicon Valley folding under financial pressure. Investors only take calculated risks where there's likely to be a return, and it's your job to convince them that your business is going to be one that makes it likely.

Raising money isn't easy, but the right approach can help you create the perfect investor pitch.

1. Start Small

It’s a pretty safe bet that your startup probably won’t get $10 million in funding right off the bat. If you don’t have the funding you need to launch a huge operation, then you need to start small. This will show dedication to potential investors, who may throw you a few thousand dollars here and there but are waiting to see growth before they dive all-in.

For example, if you want to launch a restaurant but can’t attract investors because you don’t have a track record in the industry, try starting with pop-ups. Have a small, carefully curated menu and test your vision in someone else’s space. This can prove to investors that you’ll be successful once you have the funding for a full-fledged launch.

2. Keep It Short

Businesspeople — especially the kind who have the funds to invest in your small business — are extraordinarily busy. Angel investors or venture capitalists, particularly the kind who fund Silicon Valley, are managing a portfolio of investments and are so short on time that they might even be hesitant to take a simple coffee meeting. Beyond that, a 2015 study from Microsoft found that the average person has an attention span shorter than a goldfish. You don’t have a lot of time to make your point if you’re trying to win someone over.

If you want your pitch to be effective, you have to keep it short. Stick to the facts and make it happen in 10 minutes or less. Say, “I’ll only take X minutes" and make sure that any “one last thing” you mention is actually the last thing. If investors are interested, a 10-minute pitch will leave them plenty of opportunity to ask questions, and if not, you can go about your day without much time wasted.

3. Know Your Business Plan Inside and Out

It’s hard to land investors without a detailed, accurate business plan. When you’re creating a pitch, your business plan should be your bible, and you cannot waver. You need to know exactly who your customers are, exactly how you plan to acquire these customers and exactly what makes your business model better and more unique than your competitors.

When you’re trying to recruit investors, you need to learn every detail of your business plan and be prepared to whip out answers to questions at the drop of a hat. It’s not a good look to say, “I’m not sure. I need to look at the figures.”

4. Have the Numbers Ready

Investors might believe in your business plan, and they might believe in your product, but people don’t just give thousands of dollars — or in the case of Silicon Valley, millions of dollars — to a co-founder raising money without quantifiable evidence that this calculated risk is likely to reap major rewards. This is where the numbers come in.

A great idea attracts attention, but what really sways venture capitalists and other potential investors are cold, hard numbers. While you’re preparing your pitch, make sure you pull out all the important figures investors might want to know. If you’re a web-based startup, have figures like monthly viewers, bounce rate and how your company has grown month over month since you’ve been in business. If you’re selling a physical product, show them how many units you’re making, if you have a good cost and markup, how many units you’ve already sold and any sales-growth figures.

5. Prove You’re Solving a Problem

One of the main reasons startups fail is because there isn’t any market need. You will not be successful if nobody needs your product or service, and this is something investors already understand. Pretty much anyone who’s seen "Shark Tank" can tell you that the sharks immediately pull themselves out of the race if they don’t think a product has a market, so you need to make sure this comes across first.

In order to really win over potential investors while you’re raising money for a new business, you need to prove that your company is solving a problem that needs solving. Work this into the start of your pitch.

6. Tell a Story

Here’s a tidbit from the marketing side: Investors will be more likely to buy into your business if you create a story around your business. You can’t put a price on pulling at heartstrings (though, actually, investors really can). A story is what sets you apart from the rest of your competition and makes your company and product unique. It also explains your company’s major initiatives and makes your vision for the future clear.

Before you craft your pitch, think about your brand’s story. What makes you human? What makes you different? How are you changing the world? This story will help persuade investors to believe in your vision and believe that you are the person to take the company on a journey to success.

7. Have a Contingency Plan

Things don’t always go according to plan, especially when you’re trying to expand your business with the help of investors. You need to have a clear contingency plan in place for how your small business is going to use the funding. Clearly, having extra cash will help you achieve certain goals, but what goals exactly? How is it going to help you expand?

During your pitch, show potential investors that their money will contribute to long-term sustainable growth and that you’re not just going to squander it on a short-sighted marketing plan or quickly outdated technology. Be up front with your investors if there are roadblocks your company is facing because you simply don’t have the cash. Those will be easily eliminated once they sign on.

8. Ask for Advisers, not Just Investors

You don’t just want a person who’s going to dump money into your project and disappear, though if someone is offering it up for absolutely no equity in return, take the money and run. In addition to that, you’ll want investors who believe in your vision and who can strategically help your company rise to success. Don’t just chase the numbers — find advisers who have been through it before.

The best investors have insight and experience in your industry and can guide you as you grow. This type of person brings immeasurable value compared to someone who is just bringing the cash.

9. Try Crowdfunding

If you want to take your business to the next level, you may want to try out equity crowdfunding if the time is right. A great equity crowdfunding campaign shows potential investors a couple of things. Mainly, it proves that you already have a supportive base of consumers and there’s a market need for what you’re offering. It also proves that you’re not totally desperate for funding.

Investing is like dating, and an investor won’t want to invest in a company that looks desperate for cash because it gives off the vibe that the company is lacking market value. Crowdfunding can break the ice with investors who are nervous to be the first one to buy in. An equity crowdfunding campaign, unlike your traditional Kickstarter, also gives investors a higher incentive because they’re investing in a stock, loan or revenue-sharing scheme that actually has benefits as your company grows but doesn’t require the huge upfront investment as a typical round of funding.

10. Be Your Authentic Self

Investors are used to hearing sales pitches all day long, but what can really sway them is a genuine connection with you. They’re not just giving money to a company; they’re specifically giving money to your company, and they have to trust that you’re going to do the right thing with it.

Be up front with your investors about who you are, the hurdles you’re facing and how they can actually help you. This type of honesty builds trust and makes you seem like a genuine human being rather than a snake-oil salesman who looks good on paper.

References

About the Author

Mariel Loveland is a small business owner, content strategist and writer from New Jersey. Throughout her career, she's worked with numerous startups creating content to help small business owners bridge the gap between technology and sales. Her work has been featured in publications like Business Insider and Vice.