Before you even think of going headfirst to investors with your idea...
You must first consider putting yourself in their shoes. Ask yourself this simple question: “What would an investor(s) want to see in my company before sinking in their money?” That being said, here are the 5 cruxes that every investor would want to know before investing in your company.
Do you know your numbers? Understanding your financial portfolio is extremely important. Most investors will review your company's financial performance - especially if you’re trying to source funds from a bank. For venture capitalists, a clear exit opportunity and high returns would always be their first priority.
With that in mind, you must be well prepared to answer all questions relating to your company’s financial stability. Further, be prepared to give details of all the signs that point towards your company’s growth and, at the same time, be able to explain if you have any plan of borrowing money or issuing shares to stimulate the growth.
Experience... Experience... Experience
How relevant is your background to that of your company? If you own a restaurant owner but have never managed one nor do you have any experience as a cook, chances are, investors won't be impressed with you. The last thing they want is to see entrepreneurs gambling with their money.
That’s to say they’ll always be looking for experienced entrepreneurs and would never endorse those they suspect lack experience. To convince them of your qualities and expertise, you must possess confidence, commitment and passion!
To attract investors, your products and/or services must stand out from that of your competitors. Ask yourself, “what makes my company more attractive than ABC Distributor?” Do your due diligence to understand your uniqueness compared to theirs. By showing your difference, you are positioning yourself for potential funding. Venture capitalists, on the other hand, will be attracted by the features and benefits of a business such as their competitive advantage, proprietary and exclusive licenses and more!
Effective Business Model
As soon as your company begins to make profits, it will begin to show its strategic value. You can present the model to potential investors to show that you’re positioned to increase profits in the future. Since investors look for different elements in a business plan, try to customize each plan before sending it to respective investors. For instance, if an investor has a penchant for financial issues and market, put more emphasis on those areas before connecting.
A large market size with stable customers has a stronger competitive advantage that will appeal to investors. This can show that your company and brand have a greater impact on the target market.
So, it’s pretty obvious that investors only capitalize on companies that project a high-growth scale. They’ll therefore invest in a company that promises to generate huge amounts of profits and has a plan that shows various sources of revenue, as well.