A Fundraising Guide for Startups to Find the Right Investor

Not all entrepreneurs have the privilege of a solid financial backing for their startup.

In fact, only a few do.

Most entrepreneurs have to struggle day in, day out to keep their startup alive and to register a sequential quarterly or yearly growth, so they can prove to the world that their business has potential.

For such entrepreneurs, raising funds from investors is the only hope they have, to take their business to the next level (expansion to new markets & verticals); and to ensure that they stay operational to continue turning their startup dream into reality. However, it is crucial to note that besides acquiring funds, it is equally important to ensure that your investment partner also assists in your business growth.

Already helping the startup ecosystem with a wide array of ecommerce solutions, FATbit Technologies here shares tips on how entrepreneurs should approach investors to boost their chances of landing the perfect investment deal.

Don’t Sell Your Product, Sell Your Business

When approaching investors, entrepreneurs are often misguided by the notion that talking more and more about ‘what their products can do’ will help in convincing investors. But even a million dollar product idea can flop, if executed poorly. And investors are aware of this fact more than anyone.

So, when you approach investors, instead of the product, focus on the vision you have behind that product. Tell them your long term goals, show that you have the required skilled manpower onboard, and describe how closely you know your customer. Don’t simply ask investors to bet upon the billion dollar market opportunity for your product; tell them how you intend to capture that market.

Expert tip: Product ideas get copied all the time; therefore, you must focus on making your business unique. You must see beforehand that your execution plan is better than that of competitors and USP (unique selling proposition) is well defined and is in sync with what the end customer needs.

Related Read: Online Service Sector Business Models with Considerable Future Potential

Know What the Investors Want

Usually, the fundraising events begin with investors outlining what they are looking for. And it is not about classifying them as angel or venture capitalist, but what are their long term plans with the investment. At this stage, you should be able to filter some investors who might actually be interested in your startup idea.

Closely analyzing investors’ requirements should give you some cue on how you should approach them with your startup idea. And it is obvious that if you plan your presentation in accordance to investor’s requirements, your chances of landing the deal increase significantly.

Expert tip: Even if you fail to raise funds from an investor, it doesn’t have to be a failure. Use the opportunity to consult with them. Ask them what they like about your startup and what not. Gather insights on improving the product so you have better chance of landing the deal next time.

Find out What Investor Would Do for You

Investments aren’t always about money alone, especially in the case of angel investors, who basically help startups stand up from the ground. Apart from being the financial backers, they also need to act as the mentor for your startup and as the influencers who build connections for you.

Therefore, before approaching investors, you should clearly outline your startup’s needs and expectations from them. And during the pitching, you also need to be inquisitive about what they would do for your startup. Besides that, also check that the investor has prior experience investing in & working with startup like yours.

Expert tip: What investors can do for a startup; sometimes vary from situation to situation. If your startup is creating an entirely new market, there’s only so much an investor can do. Entrepreneurs need to be flexible in that regard to ideally decide when to rely on investors & when on their own conviction.

Be Clear on the Legal Aspects

A startup investment deal is never non-consequential. Investors always have certain expectations in terms of return. And if your startup fails to deliver it, consequences can be devastating (not just for the business, for entrepreneurs too).

While it is okay to apply all the tactics to convince investors, entrepreneurs should never overlook the risk involved with money they are taking, and whom they are taking it from. If an investor’s expectations seem something your startup won’t be able to deliver, it is better to move on. Obviously, there’s always some risk involved with an investment, but it is basically deciding which risk you can take on and which not.

Expert tip:

Entrepreneurs may often fail to correctly apprehend the amount of risk involved, especially when they don’t understand the legal terms of the investment properly. Therefore, it is strongly advised to consult with a business attorney during the process and have everything documented properly.

Conclusion

Convincing investors to back your business idea is one thing, but identifying the right investor for your startup is a different thing altogether. To land the best deal, you need to perfect both these arts. And as we have explained in this post, by and large, the key to landing the right investment deal is to first define your startup’s goals & needs clearly and then find an investor whose expectations are aligned to those goals & needs.