In most startups, getting funded is a fundamental step to get further and grow. Therefore, investors are crucial in the process. You must look for a truly match, where they are engaged to your startup.
In this article, we will explain you, six factors to consider when raising money from investors.
1. Passion. Definitely, passion for the project. Investors are looking for someone willing to invest their own money in their project, which is evidence of the financial commitments and sacrifices you have already made. You must believe in it and be ambitious about it, to achieve the goals you have settled. This also means you must know everything about the startup, even if it is not part of your daily task. If you have a meeting with an investor, be prepared to explain every detail. Work with your team possible questions and answers. This will give you a better idea on how to sell your product with a few lines. Remember time is gold.
2. Traction. You must show investors that you are not just all talk or big ideas but have already begun taking action to build your startup. You must have a proof of concept to show, which validates the viability of the idea. If you do not have the final product, you can have a MVP (minimum viable product), which is the product with enough features to satisfy early customers and deliver feedback for future product development. Sometimes is best to do more than expected, if you are in an early stage and you have the possibility to make an MVP, do it! Investors appreciate every effort you put on your idea.
3. Market for your product. An investor will not be interested in funding an attractive product that has no research or that has a tiny market. You must show a commercial distinction, for example, you could emphasize in customers and/or frequency of purchasing. Therefore, get it ready! You need to make an effective market research that identifies customer needs, drives, fears, and frustrations. Afterwards, you must prepare a resume with highlights that support the idea of your startup.
4. Product differentiation leads to a competitive advantage. You must take time to dig deep in the market and analyze who are your competitors and possible partners. Establish what makes you different. This is product differentiation, to distinguish a product or service from other ones that are similar in the market. Think about this, how do certain geographic, cultural, or strategic advantages play in your favor? Again, you can make a list and select the top facts. When you have settled the product differentiation, it will be easier for you, to develop a competitive advantage, usually based on three sources: price, product and customer experience.
5. Highlight team strengths. It is essential to show investors that there is not a risk concentration in one person and that the formed team is both, complementary and efficient. Ask the following questions: what kind of expertise do we have that makes us visible and competitive in the market? Do we have complementary skills as sales, marketing, product development and operations? Is there a strong chemistry on the team, we help each other and we get along? When you are in front of the investor, you need to mention as many of the team strengths as possible.
6. Financial planning. You should have an idea of where your company can go to in the future. Think about how to answer the investors, the following questions: How much do I need to invest? When do I have to invest it? In addition, they might also ask How much will I get back? When will I get it? For these questions, you can prepare a financial projection to show a solid base. The investor must see you are committed to the idea and that it is worth it.
Have in mind, sometimes investors look for intangibles such us personality, charisma and ethics. Some others look for “someone that is real, that is not afraid to be him/herself, coherent with what it’s said, and what it’s done”.
If you have a startup and you want to increase the value of your business, we can help you! This 26th September, we have an Introduction Day about finance and how to get funded. There are only two spots left, if you are interested, click down here:
Written by Claudia Flores Jiménez