Attracting Investors: Strategies For Securing Their Interest

Making investors invest in your business is a challenging task. Investors are in it to make money, so your task is to show them that you will do just that. Here are some ways to make investors invest in your business:

- Research relevant investors: Target those likely to be interested in the product and service you provide. Understand their background, the businesses they've previously invested in, and the criteria they use when making investment decisions.

- Network and build relationships: Investors can be hard to track down, but finding them and building relationships is important. Attend events that unite founders and investors, ask other entrepreneurs and advisers if they can make introductions, and check your contacts on networking sites such as LinkedIn.

- Develop a solid business plan: A strong business plan is often a crucial requirement for getting investment. It should include a description of your business, its objectives, and its short, medium, and long-term goals. It should also cover your skills and experience, customers, market, competition, sales and marketing, operations, and financials.

- Create a persuasive pitch deck: If an investor invites you to pitch, a pitch deck is key to winning investment. The deck should be a concise and compelling slide presentation that communicates information about your business clearly and excites and engages the investor.

- Build a strong management team: Investors may expect to see a passionate and determined management team with the skills and experience to make the business a success.

- Showcase a unique value proposition: Convey to investors what makes your product or service stand out and demonstrate the problem you are solving or the need you are meeting.

- Demonstrate market potential: Investors need to know that there is a big enough market for your offering and that your business has strong potential. Conduct market research to back this up.

- Develop financial projections and a clear path to profitability: Investors will want to know how your business will make money and how and when they will make a return on their investment.

- Have a good reason for the investment: Investors will want to know exactly why you need the money and exactly what you plan to do with it.

- Have a clear investment structure: Investors will want to know how the investment will work and whether they will get dividends or just the increase in the value of their shares over time.

Show investors your business has a market

Investors will want to see that there is a market for your product or service. You need to convince them that there is a big enough market for your product, and that your place in that market is a sure thing.

Research your market

You need to show that you have a clear understanding of your target market, industry, and any competitors. You should include market research in your business plan, and be prepared to share your insights with investors. This can include data from the Office of National Statistics, reports and databases via the British Library Business & IP Centres, surveys using tools like SurveyMonkey and Typeform, or insights from market research companies.

Differentiate your business

Show investors what makes your product or service stand out. Is there market potential for your unique product? Does it solve a unique problem? Is it a brand-new innovation or invention?

Even if your product or service is not entirely new, you need to demonstrate how it is different from or better than what your competitors offer. This is known as your "competitive advantage" or "unique selling proposition" (USP).

Demonstrate market potential

Investors need to see that your business has strong growth potential. Show them that there is a large market opportunity and customer base for your product or service. Explain in detail how you have an unprecedented advantage and how your business model makes you unique.

Create a sales and marketing plan

As part of your business plan, include a sales and marketing strategy that outlines how you will attract and retain customers, and close sales. Discuss the sales channels and marketing tactics you will use, such as social media, exhibiting at conferences, and online advertising.

Showcase customer acquisition and retention

Investors will want to see metrics such as your churn rate (the rate at which customers drop off) and your customer acquisition cost. A low churn rate indicates that you are retaining customers, which is generally more cost-effective than acquiring new ones. It also demonstrates that your marketing practices and retention strategies are effective.

Provide financial projections

Investors will want to see financial projections, including a cash flow forecast, a profit and loss statement, and a balance sheet. These documents will help investors understand your business's financial health and growth potential.

Be prepared to explain the assumptions behind your projections and any variables that could affect these numbers. It's important to provide realistic numbers and avoid over-inflated projections, as investors are turned off by data that is not grounded in reality.

Demonstrate your passion for solving customer problems

When pitching your business idea to investors, it's important to showcase your passion for solving customer problems. This not only demonstrates your commitment to your customers but also highlights the potential for growth and success. Here are some tips to effectively convey your passion for solving customer problems:

• Understand the customer's pain points: Start your pitch by identifying the problem you are solving in the marketplace. Share a compelling story or anecdote that engages your audience and demonstrates your understanding of the customer's struggles. If possible, relate your story to the investor and their previous investments.
• Offer a compelling solution: Explain what makes your product or service unique and how it effectively solves the problem you've identified. Be concise and avoid using buzzwords, making it easy for the investor to understand and explain to others.
• Highlight customer acquisition and traction: Demonstrate that you have a clear customer acquisition strategy and have achieved early traction. Explain how you plan to reach your target market and present any relevant data or user behaviour information to support your approach.
• Showcase your team's expertise: Investors invest in people as much as ideas. Introduce your team and highlight their relevant skill sets and experience. Be honest about any gaps in your team's expertise and explain how you plan to address them.
• Provide a competitive analysis: Know your competition inside out and be prepared to communicate your unique value proposition. Use a competitive matrix format to visually demonstrate how your product or service compares to and outperforms the competition.
• Share your successes and milestones: Don't be shy about showcasing your successes and milestones. Be proud of what you and your team have accomplished, including sales, contracts, key hires, and product launches. This builds credibility and demonstrates your ability to execute.
• Explain your revenue model: Investors want to know how your business will make money. Be specific about your products, pricing strategy, and how you plan to maximise margins or gain traction. If you have financial projections, be prepared to explain the assumptions behind them.
• Demonstrate your understanding of the market: Show that you have conducted thorough market research and understand the market opportunity for your business. Provide data and insights to support your claims and highlight the potential for long-term growth.

Remember, investors are not just investing in your business idea but also in you and your team's ability to execute and solve customer problems. Your passion, expertise, and commitment to your customers will shine through when you effectively communicate these points in your pitch.

Showcase your unique value proposition

A value proposition is a concise statement that summarises the problem you solve, the solution you offer, and the benefits you provide to your target market. It should also highlight your competitive advantage and how you will generate returns for your investors.

• Solve a real problem: Demonstrate that you are solving a significant problem for a large and growing market. Show that you have validated your problem-solution fit and provide evidence of demand and traction.
• Offer a unique solution: Explain how your product or service works and how it differs from existing alternatives. Highlight your competitive advantage and any unique features or benefits you offer.
• Prove your traction: Show that you have achieved key milestones such as product development, customer acquisition, and revenue generation. Provide relevant metrics and indicators, and share feedback and testimonials from your customers, partners, or advisors.
• Communicate your ask: State how much money you are raising, what valuation you are proposing, and what equity or debt you are offering. Explain how you will use the funds and what return you expect to generate.
• Create a pitch deck: Develop a concise and compelling pitch deck that summarises your value proposition. Use simple and attractive visuals, clear and concise text, and powerful and memorable stories. Rehearse and refine your pitch, and be prepared to answer questions and objections.
• Know your audience: Understand who your potential investors are, what they are looking for, and how they make decisions. Research their backgrounds, preferences, and portfolios to align your value proposition with their goals and expectations.
• Use simple and clear language: When explaining your unique solution, avoid technical jargon. Use simple and clear language to ensure your message is easily understood by your investors.

Develop a solid business plan

A solid business plan is often a crucial requirement for getting investment. It will help an investor decide whether to fund your business, so it's important to be prepared and show that you're thinking about the future – as that's the investor's number-one concern.

Your business plan should include:

• A description of your business, its products or services, and an overview of your short, medium, and long-term goals
• Your skills, experience, and the skills and experience of any co-founder(s), management team, and advisers
• An understanding of your customers, how you fit into the market, your competitors, and how your business is different or better
• How you attract customers, including your sales channels, pricing strategy, and marketing tactics like social media, exhibiting at conferences, and online advertising
• Operational issues, including current and future staff, equipment or tools you require, regulations related to your business, and contingency plans
• Financials – the revenue you are making and expect to make in the future. Include a detailed cash flow forecast that estimates the money you expect to bring in and pay out over time

It's also a good idea to include data-based, hard-number financial projections, sales channel information with data to show why those channels will be effective, and marketing plans and goals with data to show why those plans will be effective.

You should also include an analysis of the competition for your product or service, a projected timeline for when you’ll start making money, and details of any potential obstacles and your plans for dealing with them.

Research relevant investors

Researching relevant investors is a crucial step in attracting potential investors to your business. Here are some detailed, direct, and instructive guidelines on researching and targeting the right investors:

• Understand Investor Types: Different types of investors suit different businesses. For instance, angel investors typically support early-stage local businesses, while venture capitalists seek firms with successful track records and high growth potential. Knowing the criteria investors use when making decisions can help you target the right ones.
• Research Investor Background: Learn about potential investors' backgrounds and their previous investments. This will help you identify investors who are a good match for your business and understand their investment preferences and strategies.
• Network and Build Relationships: Investors can be challenging to find, but building connections is essential. Attend events organised by angel networks, the UK Business Angels Association (UKBAA), and the British Private Equity & Venture Capital Association, which bring together founders and investors. Utilise your network, including entrepreneurs, accountants, and lawyers, to gain introductions to potential investors.
• Utilise Online Platforms: Make use of networking sites such as LinkedIn to identify valuable connections. Send concise and personalised emails to investors, showcasing your knowledge about their work and investment criteria.
• Develop a Strong Business Plan: A solid business plan is often crucial for attracting investors. Your plan should include a company description, skills and experience of the team, customer and market understanding, sales and marketing strategies, operations, and financial projections.
• Showcase a Unique Value Proposition: Convey to investors what sets your product or service apart from competitors. Demonstrate how your offering solves a problem or meets a specific need in the market.
• Demonstrate Market Potential: Investors want to know there is sufficient market demand for your product or service. Use market research tools such as Office of National Statistics data, reports from the British Library Business & IP Centres, surveys, and market research companies to showcase the market potential.
• Financial Projections and Path to Profitability: Investors will want to understand how your business will generate profits and when they can expect a return on their investment. Provide financial projections, including a cash flow forecast, profit and loss statement, and a balance sheet.
• Understand Investor Suitability: Not all investors are a good fit for your business. By researching and understanding the criteria, background, and preferences of potential investors, you can better target those who are likely to be interested in your product or service.

Remember, researching relevant investors is a critical step in securing funding for your business. It helps you identify and target investors who are a good match for your business and increases your chances of attracting investment.

Frequently asked questions