For startup owners, one of the biggest obstacles to growth can be finding investors to provide them with the capital they need to take their business to the next stage.
As the CEO of CaPatel Investments - a firm specializing in investing in South Asian startups and businesses - Anip Patel gets asked all the time what entrepreneurs need to do to attract investor attention. He says there are some core skills and principles entrepreneurs need to follow to successfully gain investor interest.
The power of the pitch
Of course, the first thing that any entrepreneur needs to attract investor interest for their startup is a strong business plan. "Having a business plan that is well-thought-out and professional shows investors that you understand the market and have the foresight and ability to execute your ideas," says Patel. "Include factors like your company's vision, mission, target market, competition, marketing strategy, financial projections, and estimated return on investment. Investors want to know that you know your stuff."
One of the most important aspects of a business plan is a clear value proposition. "Tell your investors how your startup offers value to customers, as that helps investors see how it can create value for them," Patel asserts. "Emphasize what sets your company apart from competitors and how you address existing market gaps. Investors want to hear ideas that are innovative and disruptive, and a unique value proposition is the best way to show that."
As Patel explains, investors look for entrepreneurs to demonstrate the traction and market validation of their startups. "Put your money where your mouth is, and show potential investors that there is a place for your startup in the market," he says. "This validation can take several forms, from early sales or partnerships to customer testimonials or positive feedback from recognized industry experts. Investors want to know that you not only have a good idea, but also that you can follow through on it."
Hand-in-hand with the value proposition is a financial model, which must be detailed enough for investors to have confidence in the potential returns of their investment. "Your financial model should show how your business will generate revenue, manage costs, and achieve profitability," Patel explains, "but make sure to be realistic about your potential. Back your claims with data, and don't make outlandish projections. Investors want to see a realistic path towards profitability."
Once you have all these essential materials and plans together, Patel suggests taking the time to create and perfect a powerful pitch. "A successful pitch is about being concise and engaging," he adds. "If you go too long, you're likely to lose the interest of your potential investors. Focus on delivering your business idea, market opportunity, and growth potential as concisely as possible, and attempt to tailor your pitch to the needs and interests of each potential investor."
That being said, the most important thing an entrepreneur must do to gain - and maintain - investor interest is to be transparent and responsive. "Potential investors will ask questions after your pitch, and maybe even during your presentation," Patel explains. "It's just part of the process. Don't get flustered or caught off-guard by a tough question, and don't mislead investors. These are the quickest ways for investors to lose confidence in you and your business."
Finding opportunities to showcase your startup
Entrepreneurs who wish to be successful in attracting investor interest will take advantage of as many opportunities as they are given to meet and connect with investors. The first place entrepreneurs should look at is industry-relevant events, such as conferences, which are great places to network with potential investors.
"Many conferences have built-in opportunities for entrepreneurs to pitch investors looking to invest," says Patel. "Even if you don't get to pitch directly, these events can be a great way to open doors and create connections that could be valuable in the future."
Furthermore, don't be afraid to leverage your existing network to create new connections and find pitching opportunities. "Ask mentors, advisors, industry contacts, and previous investors to introduce you to potential investors they may know," Patel suggests. "These people are likely to have good things to say about you, and the suggestion of a known or trusted individual could increase their faith in you and your business."
Finally, do not miss the opportunities that online networking platforms have to connect you with potential investors. "There are numerous online platforms designed specifically to link entrepreneurs with potential investors these days," says Patel. "Create a profile on platforms like AngelList, Crunchbase, and Gust, and use it to actively engage with potential investors in your field."
Many entrepreneurs put all the pressure on themselves, failing to realize the benefits of leveraging a strong team. "As an entrepreneur and startup founder, you are the face of your organization," says Patel. "However, investors want to see that you are surrounded by talented individuals who will help you bring your vision to life. Recruit employees and partners with a track record of success in your industry, and highlight their experience in your presentations and pitches."
Ultimately, Patel reminds entrepreneurs that the characteristics investors are looking for are confidence and knowledgeability. "From your business plan to your financial model and your pitch presentation, make sure every interaction you have with potential investors is polished and well thought out," he concludes. "This will prove to investors that you mean business."
