Throwing your idea to investors, despite they are bankers, VCs, or angels, can be intimidating, so plan by putting yourself in the investor’s shoes.
While every investor will have their conditions and be looking for something that matches their interests and pursuits. There are several things you should consider if you want to stand a chance at getting funded.
Here is a list of important things that an investor wants to learn before dropping money into a company.
1. Financial performance.
Potential investors want the numbers so it’s clear that your company has outstanding financial performance. Venture capitalists will look for the potential of high returns and a clear exit opportunity.
Be prepared to answer questions about the financial steadiness of your company. You’ll be addressing an investor with a business plan that has your financials worked through. The cash flow plan—how much money is coming into your business and how much money is going out. Prove your business is competent in handling its financial commitments.
Give them an idea of how long it will take for you to make a profit and for them to recover their investment. This is one area that you can expect investors to seriously evaluate
2. Background and experience in the industry.
Passion and commitment should be evident to inspire confidence in investors and stakeholders. Investors look for experienced entrepreneurs and management teams with a track record of high performance and leadership. Most investors will research your business experience and your background in the industry.
“Investor fit” is particularly important to angel investors compared to venture capital fund managers. Angel investors place great importance on “chemistry” between themselves and the entrepreneur because they generally take a more hands-on approach in the businesses they invest in.
3. Company uniqueness.
Prove to your investors, with solid evidence, that your market potential is big enough to make investing valuable. Convince the uniqueness of the product or services.
Venture capitalists look for product characteristics such as proprietary features and competitive advantage. Investors look for features that differentiate you from potential competitors, exclusive licenses, and exclusive marketing and distribution relationships.
4. Effective business model.
Present the business model that you are currently using and prove that it will help your company become more profitable.
For example, venture capital fund managers and angel investors put more emphasis on both market and finance issues. Different types of investors seek different characteristics from a business plan. It’s important to customize your business plan and pitch to each investor.
5. Large market size.
Market size is one of those things that will invite an investor’s attention. Angel investors ideally invest in solutions that discuss major problems for significantly large target markets. On the other hand, venture capitalists look at market characteristics such as significant growth and limited competition when investing.
What will make it hard for others to rise above you? What is your “unfair advantage” or the thing that no one can compete with? What makes you a game-changer? Therefore, investors look for companies that can grow fast and generate notable profits beyond the initial product idea.
A larger and more stable customer base will serve as proof that, the stronger competitive advantage you will have when pitching to investors.
What should go into your investor-ready business plan?
Here’s what you need to include in your Business Plan:
- The problem or need that you’re solving for your customers
- Your product or service—how you’re solving the problem
- ·The target market size and demographics
- Your sales channels
- A basic marketing plan
- ·Competitor analysis and your competitive advantage
- Real financial projections including a full cash flow forecast
- Key milestones in your business to date and a timeline of expected milestones to come
- Key team members, business owners, and advisers
Make a perfect business plan to convince your investors easily without any confusion. A strong business plan from Finline will give you the confidence to approach investors.