Seeking Investors? Ask Confidently

Knowing how to ask for investment is an important part of achieving success when starting a business. There are several key elements to a successful investment pitch. First, ensure you are presenting to the right audience. For a small startup, pitching to large venture capital companies may not be the best approach, as they invest large sums and expect businesses to be at a more advanced stage of development. Instead, consider pitching to angel investors, who are often a better option for attracting the right investors. Present your pitch as a story, outlining the company's bright future and potential for growth, as investors are usually more interested in this than a company's current value. Use passion and confidence to persuade investors, and make sure to keep your pitch uncomplicated.

Prepare a business plan

A business plan is essential to securing investment. It should be an overview of the products and services you sell, and the customers that you sell to. It should also explain your business strategy, including your marketing strategy, and who your competitors are.

Your business plan should include an executive summary, which is a concise overview of your business and your plans. This should include a summary of the problem you are solving, a description of your product or service, an overview of your target market, a brief description of your team, a summary of your financials, and your funding requirements.

The next section should describe your products and services, and how they solve a problem for your target market. This is where you can showcase the value of your products and services by crafting a compelling narrative. It is also the place to discuss any competitive advantages you may have, such as intellectual property or patents. If you have any initial sales, be sure to include this information to show that your idea has traction.

Your target market analysis should include specific information such as age, income level, and location ("demographics"), as well as interests and habits as they relate to your business ("psychographics"). You should also include information about the size and growth of your market, and how your business is positioned to take advantage of any expected changes in your industry.

A competitive analysis should fully lay out the competitive landscape and then explain how your business is different and has an advantage.

The marketing and sales section of your business plan should cover how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. Start with a positioning statement that explains how your business fits into the market and how you will explain the advantages of your product or service to customers.

The operations section of your business plan describes the day-to-day requirements for your business to run smoothly, such as supply chain management, manufacturing processes, equipment and technology, and how you distribute your products and reach your customers.

Although it is not required, mapping out key business milestones and metrics can be useful for measuring your success. Good milestones clearly lay out the parameters of each task, including a description, the proposed due date, and who is responsible.

The organisation and management team section of your business plan is where you describe your current team and any gaps you need to fill. Briefly highlight the relevant experience of each key team member and make the case for why yours is the right team. Also provide a summary of your company's current business structure and how the business is owned.

Finally, your business plan should include a financial plan chapter, including sales forecasts, expense budgets, profit and loss projections, cash flow projections, and a balance sheet.

Choose the right investors

Choosing the right investors is a critical part of the process of securing funding for your startup. Here are some key considerations to help you select the right investors:

Types of Investors

Broadly, investors fall into three categories: angel investors, venture capital (VC) firms, and corporate venture capital (CVC) firms. Angel investors are typically former entrepreneurs who invest their own money and tend to invest smaller amounts at an earlier stage. VC firms invest on behalf of limited partners and may provide additional funding in subsequent rounds. CVC firms are a subset of VC firms that invest on behalf of large companies, often in startups within their core industry.

Industry Knowledge

Look for investors who understand your industry, ideally through hands-on experience. They should have deep knowledge of the market forces, historical changes, and future direction of your industry. This enables them to provide insightful advice and help you navigate potential pitfalls.

Functional Expertise

Seek investors with functional expertise in entrepreneurship and fundraising. For angel investors, consider whether they have built and sold companies, advised startups, or been founders themselves. For firms, evaluate their specializations, such as finance or industry-specific analytics, and their ability to help with operational challenges.

Network and Connections

Investors with strong networks can provide valuable connections to potential partners, talent, advisors, and other investors. Assess the size, location, industry, and functional expertise of an investor's network to determine its potential value to your business.

Track Record

Research the investing track record of potential investors. Have they worked with similar companies to yours? Look for VC firms with a history of successful investments and exits. Evaluate their gross internal revenue (IRR) over an extended period to gauge their experience and suitability for helping your business grow.

Platform and Services

Some VC firms offer additional services beyond capital investment. These may include connections to operating partners, marketing expertise, or public relations contacts. While investors are not an extension of your team, some may be able to provide a higher level of support and resources.

Stage of Investment

Ensure that the investors you choose are the right fit for your current stage of growth. Including investors who are more suited to a different stage, such as Series A, in your seed round can lead to misaligned expectations and challenging board and product decisions.

Remember, choosing the right investors is crucial, as they will be with you throughout the journey of building your company. Take the time to evaluate potential investors based on these criteria and select those who align best with your needs and goals.

Make your pitch a story

When asking people to invest in you, it is important to have a compelling pitch that is presented as a story. Here are some tips to help you craft a narrative that will engage and excite potential investors:

Begin with a Compelling Story:

Start your pitch with a story that addresses the problem you aim to solve in the marketplace. This will immediately engage your audience and spark their interest. Include any data or testing results you have to support your story. Relate your story to the investor whenever possible. For example, consider their previous investments, their pain points, and their goals. This shows that you have done your research and helps you tailor your story to their interests.

Outline the Company's Bright Future:

Investors are typically more interested in a company's potential than its current value. Confidently present your business idea's future prospects and growth opportunities. The better you are at outlining this vision, the higher your idea will be valued. Show investors how their capital investment will take your business to the next level and help it reach its full potential.

Share Your Passion and Confidence:

Use your passion and enthusiasm for your business to persuade investors. Be dynamic and confident in your pitch, and help them understand what makes your business unique. Make sure they see how their investment can fuel your company's growth and maximize its potential.

Keep it Simple and Uncomplicated:

While your audience likely has extensive business experience, avoid industry-specific jargon or terminology that might be unfamiliar to them. Keep your pitch simple, straightforward, and easy to understand. This will increase the likelihood of your message being properly received and achieving its goal.

Include Sales and Financial Information:

If you have generated sales, be sure to mention this to potential investors. While current earnings are important, investors are primarily interested in potential profits and the scalability of your company. Outline your plans for expanding your success and increasing profitability. Provide financial statements, revenue projections, and any other relevant data to support your story.

Set a Clear Timeline:

Having a clear timeline for the investment process can be beneficial. It makes the process more direct and can create a sense of urgency for undecided investors. It also allows you to stay focused and on track throughout your pitch.

Remember, your pitch should be a well-crafted story that engages investors, highlights the potential of your business idea, and demonstrates your passion and confidence. Practice your pitch, simplify your message, and focus on building a narrative that showcases the value and potential of your venture.

Show passion and confidence

When asking people to invest in you, it is important to show passion and confidence. This is a key element of a successful investment pitch. Here are some tips to help you showcase your passion and confidence effectively:

Know Your Business Inside Out:

Firstly, you need to be an expert on your business. Know every detail, from the financial statements and sales figures to the unique qualities that make your business stand out. This knowledge will fuel your passion and confidence when presenting to potential investors.

Tell a Compelling Story:

Instead of a dry, fact-based presentation, frame your pitch as a story. Investors are often more interested in the potential of a business than its current value. Confidently and passionately paint a picture of your business's future and how it will evolve with the right investment.

Be Dynamic and Engaging:

Use your passion and enthusiasm to engage your audience. Make them understand why your business is special and why they should care. Show them how their investment will take your business to the next level. Be dynamic and memorable, ensuring your pitch stands out from the crowd.

Keep it Simple and Uncomplicated:

While your pitch should be passionate, avoid overly complex industry jargon. Keep your message straightforward and easy to understand. This will ensure your passion and confidence come across clearly, and your audience is more likely to remember your key points.

Highlight Your Sales and Potential:

Mention any sales and revenue generated so far. While investors are primarily interested in future potential, showing current success demonstrates that your business is already making money and has a solid foundation. Use this as a springboard to outline your plans for expansion and future profitability.

Believe in Yourself and Your Business:

Your passion and confidence will be infectious if you truly believe in what you're saying. Investors will pick up on your attitude and enthusiasm. If you don't fully believe in your pitch, they won't either. So, ensure your passion and confidence are authentic and backed up by a strong understanding of your business and its potential.

Remember, passion and confidence are essential, but they need to be supported by a well-structured pitch, a clear timeline, and a thorough understanding of your business and the investment landscape.

Keep it simple

When asking people to invest in you, it's important to keep your pitch simple. Here are some tips to achieve that:

Know Your Audience

It's crucial to tailor your pitch to your audience. For a small startup, approaching large venture capital companies might not be the best strategy as they typically invest significant amounts and expect businesses to be at a more advanced stage of development. Instead, consider targeting angel investors who are often a better fit for early-stage startups. Know your investors' goals and needs, and craft your presentation to align with their objectives. Use language they're familiar with and paint a picture that resonates with them.

Tell a Compelling Story

Present your pitch as a story. Investors are generally more interested in a company's potential than its current value. Confidently share your vision for the future and outline the steps that will get you there. Make your pitch dynamic and engaging, helping investors understand why your business is special and how their investment will contribute to its growth.

Keep it Uncomplicated

Use straightforward and simple language in your pitch. Avoid industry jargon or technical terms that may be unfamiliar to your audience. Remember, the simpler your pitch is, the easier it will be for investors to understand and connect with your idea.

Highlight Existing Sales and Future Potential

If you've already made sales, be sure to mention them. It shows that your idea is generating revenue and has market validation. However, remember that investors are typically more interested in potential profits and scalability than current earnings. So, while boasting about your current success, always outline your plans for expansion and future growth.

Provide Clear Financial Information

Prepare detailed financial statements, including balance sheets, income statements, and cash flow statements for the past three years, as well as forecasts for the next three years. This transparency will help potential investors understand your costs, revenue projections, and financial health.

Set a Clear Timeline

Keep your investment timeline concise. While it may seem counterintuitive, a tight timeframe can make the investment process more direct and less expensive. A deadline might convince an undecided investor to take the leap, knowing that the opportunity won't last forever.

Remember, a simple and concise pitch doesn't mean lacking in substance. Provide all the necessary information but do so in a clear, concise, and easy-to-understand manner.

Frequently asked questions