You are an entrepreneur who is preparing for your seed fundraising round. You have your business plan and financials and are looking to be funded by angel investors or venture capitalists. Sounds simple, right?
The truth is, it is not as straightforward as it sounds. Angel investors and venture capitalists see hundreds of teams every year but only end up deciding to invest into a handful of them. Why? This is because only 1% of them truly understand what it means to be investor ready.
Being investor ready, in simple terms means, understanding the key points that investors want to know about your business opportunity so that they can decide whether they are interested in making an investment. It means putting yourself in the mind of your investor and presenting from their point of view, to position your opportunity so that it has as much chance of success as possible to attract investors.
Before you go before your potential investors, you need to figure out what type of funding is ideal for your business. There are different types of funding and as an entrepreneur; you need to decide which type is aligned with your company’s objectives. This will also help you determine whether the investor’s objectives are aligned with your own. With this figured out, we can now delve into what investors look for in a start-up. John Kimathi of kEA Africa Consulting and Michael Monari of Longitude Finance joined us to shed more light on the topic and give us tips on how to get money out of the investors’ pockets and into our businesses. Here’s a list of 5 things an investor wants to know before sinking money into your business.
1. Uniqueness of the idea
Your products or services need to be unique. You need to show the investors why your product is different from your competitors and make them clearly understand what makes it stand out.
2. The problem being solved, market and growth drivers
They want to know exactly what problem your product/ service is solving and the type of market you are targeting and if it is growing. Investors typically invest in solutions that address major problems for significantly large target markets. Give them compelling reasons as to why more of your product/service will be bought and what sets you apart from your competitors. You need to prove to the investors that your market potential is big enough to make investing worthwhile.
3. About the product/ service/ technology
They want to understand in simple terms, exactly how your product works. This will help them determine if it’s something that they would be interested in or not.
You need to be able to give the investors credible projections of strong financial growth. If your company has been running for a while, you need to show that you have had excellent financial performance so far. If your company has not yet started up, then you need to show what they can expect you to bring in, when you’ll hit your projected numbers and when they can expect to start earning their money back.
Investors are interested in knowing about the team behind the company. They want to be assured that they can all work together to propel the company. Show them that you have an experienced, driven and passionate team by your side ready to take the company to the next level.
Getting funded is not easy and it could take time. Don’t let a ‘NO’ from potential investors put you down. Be resilient, do more research and use their feedback to improve your pitch for the next investor meeting.