How Should Entrepreneurs Approach Investors

I’ve always wanted to write an article on business and decided to give it a shot. Hopefully, this post gives you the 411 if you’re an aspiring entrepreneur.

Over the years, the subject of money has elicited a slew of opinions from various people. Some love it, while others hate it. The profound few might tell you that they seek happiness from the little things where money holds no place. Some intellectuals go a bit further by stating that they appreciate the efforts undertaken to earn it and so on.MoneyMoneyMoney

Now, what if you happen to mention these statements to anybody from the cutthroat corporate world?

You are most certainly bound to become a laughing stock.

Money is the lifeline of any type of firm, be it profit-oriented enterprises, charitable organizations, SMEs or huge conglomerates. It’s the blood which flows through the veins of the firm, thus allowing it to function well.

However, it proves to be much more for the wide-eyed entrepreneur who seeks funding to materialize his/her vision.

The art of approaching potential investors is very much like the game of Minesweeper. The repercussions of a single misstep bring about some heavy casualties. Which is why this article will guide you through the dos and don’ts of this process.

What should you do before approaching investors?

Various measures need to be taken to ensure full credibility and transparency on your part. Start off by knowing your business’ credit history and keeping track of your personal finances. Backers usually need proof that you can handle your money responsibly and pay off your debts on time. You can obtain credit reports from a reputed credit-reporting agency for this purpose. Don’t forget to keep an eye on your credit score, too.

Lining up the team is another important activity. Investors need to be assured that you and your team can execute the ambitious business plan laid before them. Elucidate about your vision for the firm’s future, the various phases of the firm’s growth cycle etc.

Speaking of business plans, ensure that you create a detailed one. It’s easier said than done, especially when investors are concerned. Be realistic by considering your burn rate, breakeven point and the amount of money needed. Know your numbers like the back of your hand. Create an estimate of your gross-margin, costs to be incurred, and first-year requirements. Identifying the types of customers, you’re planning to acquire is a bonus.

Do your research on your potential investors. Matching your business strategy and financial needs to the right investor is of the utmost essence. Learn about the way they conduct business and their various criteria. After all, knowing is half the game won. Create a wish list of potential investors and choose each of them carefully. Choosing an investor is a step towards commencing a long-term symbiotic relationship. Define yourself and your firm. As time goes by, the wish list will have drastically reduced to those investors who are on the same page as you regarding time, strategy, funding, and goals.

When should you approach investors?

The quote “strike while the iron is hot” couldn’t be more apt for this situation.

The idea of approaching investors when you’re running out of funds and are close to desperate is a badly thought-out one. Instead, you need to make a pitch when you’re in top form i.e. bringing in the money alongside some eye-catching metrics to back you up. For better chances, start holding the conversations before the need for money.

Apart from the ka-ching, this approach rakes in other benefits. You get the opportunity to reach out directly instead of cold calling later. The backers get to witness your progress which increases your credibility. You get the opportunity to branch out and build connections, irrespective of the outcome. These connections could be of future use. And lastly, you get to pick the investor who’s right for you.

How do you connect?

Always stick to warm leads when you’re starting out.

Reach out to a connection who’s a credible friend or investing partner. He/she could introduce or recommend you to investors who will be good for you. Try to attend conferences where these investors might be present or even try branching out through your connections on websites such as LinkedIn.

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These investors might be board members, industry influencers or even founders of portfolio companies/VCs, the list goes on and on.

Because investors get so many inquiries, you need to create a great first impression by standing out as someone who’s valuable and worth paying attention to. Once that’s been taken care of, the momentum is set.

Now that you’ve got a brief idea about how to approach your backers, step back and analyze. Think about building the vital path to investors and be smart about it. This is just the beginning, so be persistent. And when an opportunity does finally knock on your door, grab it with both hands.

Copyright © 2017 by Shamika Lal,  all rights reserved.