Emeka is an intelligent young graduate who goes the extra mile to earn a living. He is devoted, well informed, and has been on the job haunt for almost two years. Everyday, Emeka would read the job opportunity section on The Guardian newspaper and browse Jobberman website to see the latest job openings. Nothing tangible came out of all his efforts and he finally took the bold step of entrepreneurship. After conducting basic research on a fantastic business idea, Emeka soon realized he had insufficient capital to fully kick-off. He needed an angel investor to help power his business idea and turn it into a successful venture.
Many entrepreneurs struggle with finding investors who genuinely believe in their business ideas. Here are a few recommendations to help you win the confidence of a potential investor:
Invest an Initial Capital: Before seeking an investor, it is important to invest an initial start-up capital that will serve as the foundation for your business. Most investors will rather deal with start-ups that have growth potential and made consistent progress thus far. Additionally, if you can prove to your investors that you have already invested time, effort and maximized all your resources to set up the business, they will be more confident that their money will be put to good use in growing a profitable venture.
Research on Potential Investors: It is important to conduct a detailed research on your investors and understand their interest and investment patterns over the years. Find out what ventures they are currently involved in, how much funding they put into those ventures and the history of all their previous investments. This will give you a clear picture on how to approach them with your business proposal, and pitch to them how your business idea is a perfect fit in their investment portfolio. New York-based partner of Soft Bank Capital, Joe Medved said at the Everywhere Else start-up conference: ‘You should be doing as much due-diligence on the investors as they are doing on you.’
Communicate the Business Idea: Beyond having an amazing idea, you need to explain your business in details to your prospective investor. Three key factors that most investors are interested in include:
– The Opportunity: Understanding the problem (or gap) your business will solve, the target market and the market size.
– The number of people involved: The managerial team, partners and other investors involved in your business.
– External Factors: Factors that may affect the overall growth and success of your business such as competitors, regulations, available technology and so on.
Explain the Company Valuation: Investors are also interested in the estimated value of your company, your financial projections, their return on investment, and the amount of company shares you are willing to give up. Like most people, investors are selfish and will only be interested in your business if it is profitable to them.
Follow up: If you haven’t heard from your investor in a few weeks, you may consider following up with them. Send emails and updates about the development of your venture from time to time. This will show your commitment towards running the business even without their help, and it may encourage them to invest in your venture. You must avoid pressurizing your potential investors and endeavour to secure a long-term relationship with them.