Sooner or later, pretty much every small business needs to reach out in order to obtain additional sources of capital. How effectively you can do this makes all the difference to your business’ long-term survival prospects.
Investment is a tricky business; there are sharks out there, and also a lot of people who spend 99% of their time saying no to requests for investment.
In order to talk the right person or organization into making a deal, you’ll really need to know your stuff. These steps will help you get started.
Be Clear About Your Plans
It’s amazing how many business teams simply decide that they need more money without having a firm idea of what they will use it for. No competent investor is going to sign up if that is the situation. If you’re going to persuade people to put their own finances at risk by taking a chance on you, you need a very clear, precise plan that sets out what will happen to the money once it’s in your hands. That begins with being clear about your needs. Set aside day to day running costs because if you’re a small organization and you can’t meet those already, no-one is going to be interested. Think instead about how funding might allow you to expand, take on much needed new employees, buy new equipment, do the R&D necessary to bring a new product online or achieve dominance within a particular marketplace. Show how those actions will generate income, how long they will take to do so and, in essence, when your investor can expect to start seeing healthy returns.
Identify Investors to Target
You’ll have much more luck with winning over investors if you target those whose interests are already in alignment with what you do. Start by profiling likely candidates and look at who they’ve invested in in the past. Sigurður Bollason has a history of investment in high fashion and the toy retail industry. Ruchi Sanghvi is interested in tech business, particularly on the software side, and in medical research. Michael Seibel specializes in companies working in video and livestreaming, with an eye for what’s coming next. By targeting the right individual you’ll make a better impression, stand a better chance of attracting interest and get the chance to connect with someone who may have useful advice to improve what you do.
It’s always easier to connect with somebody if you have something in common to begin with. Don’t assume that top investors would never mix with people at your level – you may already have connections that you don’t know about. Use online tools like LinkedIn to identify an individual potential investor you might be able to start getting to know or indeed a series of people with a view to getting a personal introduction. Attend networking events and look out for other happenings that are less directly related to business but where thy might be expected to put in an appearance, such as fundraisers for charities they support.
Develop Your Pitch
When you eventually get that magic meeting, it’s vital that you make a good impression, so waste no time on honing the perfect pitch. Ideally you should be able to sum up what your venture is about in a single sentence, following it up with a two-minute chat about who you are and what makes this opportunity so special. Your delivery matters as well as what you say, so make sure you’re well dressed and that you speak clearly, and don’t shy away from making eye contact. In order to give a prospective investor confidence in what you’re working on, you need to come across as 100% confident in it yourself.
Learn As You Go
No matter how good your pitch is and how effectively you’ve targeted likely investors, you won’t always be successful. Fundraising, like anything else, takes practice – but this means that it’s essential to spend time analyzing your rejections, no matter how uncomfortable that may make you feel. Every single pitch you make is a learning opportunity. Listen to feedback and aim to continually refine your plans and your approach. It’s the entrepreneurs who really knuckle down and do this who ultimately come out on top.
As long as you have a realistic business plan, you will find funding eventually – it just takes time and hard work. When you do receive offers, don’t be afraid to be selective – you can say no too, and you need to make sure that the deal you ultimately agree to is the right one for you. Then you can move forward with confidence and start developing your business.