Raising money to launch your start up isn’t as easy as you might think. The television program “Shark Tank” has led people to think that it’s really simple. However, the reality is, it isn’t that easy.
Catching the attention of investors takes hard work and a solid business plan. Entrepreneurship has become attractive to more and more people because the internet has opened the door to new business ventures like never before. But because there are more entrepreneurs seeking funding, the market is more crowded, meaning you have more competition and investors can be more picky.
To grab the attention of investors, do these three things to start, and you will be miles ahead of everyone else.
3 steps to becoming "investor ready"
1) Build your initial product
Investors need to see what your product looks like and how it works. This can mean some out-of-pocket expenses before you’re up and running, but it’s money well spent. This initial product can be a prototype or mockup of what your vision is.
It will benefit you to have it be a fully functional product with as much of the design fleshed out as possible. The more an investor can see the overall vision of your product and what makes it unique, the more likely you are to receive funding.
2) Get validation from users and establish sales
A great idea may be only a great idea and have little to no marketability. The only way to prove that your product is truly desired and needed is to test it. Ideally, you should get 10-100 users to use the product and share their thoughts. This can help you tweak things before building manufacturing partnerships and putting a product on the market that has flaws or lacks an established audience.
The better established you are, the easier it is to find an investor. If you have sales, you can prove your worth and that there is demand for your product or service. This is especially true if you’re working to carve out a new market for a product or service never before seen or heard of.
Sharing user testimonials or focus groups can provide investors peace of mind that you’ve done your homework and that people will like what you’re selling.
3) Build a business plan and financial model that illustrates the business model with capital
Investors like to know how you’re using their funds. The more you can define the use of capital and how you’ll begin bringing in enough money to become stable, the more attractive your business becomes.
When an investor is evaluating offering capital to help your small business get started, he or she needs to know that they’ll get that money back and more. By providing a clear roadmap for how you’ll manage your finances, when you’ll begin bringing in money and how you’ll repay the investment, you prove your company’s long-term success plan.
Additionally, an investor needs to know that you aren’t just going to blow through their funds quickly and need to seek further investment shortly thereafter.
Need help with your pitch?
Pinewood helps startups and established businesses with their financial modeling, investor presentations, and interim CFO solutions.