Let’s face it, starting a business, any business is expensive and only few entrepreneurs have access to personal resources to get the ball rolling.
Most have to seek financing – loans from family and friends, loans from financial institutions and giving equity to venture capitals.
Venture capitalists or investors have a different mindset when looking for startups to back up. While most lenders give you money in exchange for interest, investors will give money in exchange for business ownership.
So how can you influence investors’ decision to invest in your start-up? You must first sell yourself, show them you have the potential of running the business successfully.
Here are key pointers investors use to separate start-ups full of potential and non-starters.
1. Passionate Founders with Skin in the Game
To attract investors into your start-up, you should show passion and a willingness to invest your own resources. You should be passionate about your product/service and willing to back up the venture with everything you’ve got.
Therefore, as a founder, you should seed fund your business before looking for outside investors You can do this from personal savings, or borrowing from family and friends willing to back up your vision.
Once you get your business off the ground, investors will be willing to chip in and help you grow your start-up.
The simple logic is that you should be sold out to your product/service enough to risk investing your own money, and potential investors will notice.
2. The X-factor
If you have you have ever met a stranger on a plane or in the park, and you got talking, but it dawned on you that you had very little in common, yet for some unknown reason, you still seemed to connect.
That’s the X-factor. It’s unexplainable chemistry, an attraction towards people you have no other connection to except that you just like them.
As crazily as that may sound, the X-factor is a powerful pull for investors, they sometimes make decisions based on your likeability.
Investors will most likely invest in your business when they experience a connection with you, and see the potential in your business idea.
How do you create that connection? Be your authentic self, especially during your presentation. Create a good environment when communicating. Listen attentively, read their body language to sense presence of the X-factor.
3. Business Readiness
To show business readiness, you have to go an extra mile, research your market, and build a comprehensive business plan-
Show investors that you have a clear plan for where you are headed, they will naturally see your grit and potential to help you kick start the business.
This is vital because investors are looking for a home for their money, a place they can invest, get a good return, and make a name for themselves.
If you can offer that, they’ll be willing to walk the journey with you.
4. A Strong Narrative
Most investors spend their days listening to lots of pitches. A good number of startup founders go the extra mile to wrap their business idea with hard data. So, given two companies with similar projected returns, who do you think will sway an investors decision to invest?
It’s always the person with a good story! Investors are human, and as human we all love a good story. Just like everybody else, investors can be persuaded by a great narrative about why this business matters to you, where you got the idea from, and where you’re planning to take it.
They want to know your business’s goals and how it will impact the world. Make sure you include that in your narrative. A good narrative proves to your investors that you have great potential of becoming a successful entrepreneur.
In conclusion, you will need to know how to attract investors to your business, of course, a strong return on investment is like honey to the bee for any investor. Show a strong ROI, work on all of the above, and you will attract any investor to your start up.