How to Lose that Vital First Investor -- And Succeed Anyway
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I've heard too many stories about young entrepreneurs giving up on their ventures before ever getting off the ground. The problem? Often, it's a lack of funding. The many rejections, ignored emails and missed calls thrown our way from potential investors can be quite demoralizing, to say the least -- but entrepreneurship is not for the faint of heart.
While in search for investors for my startup Ratifye, the social-product, venue-rating site, which I founded with fellow Babson College student Han Kim, I quickly learned that opportunity often comes unexpectedly.
After months of working on the idea and fundamental concepts behind Ratifye, we felt ready to take part in Babson's Big Idea Competition for a chance to win investment funds from a panel of venture capitalists. The competition was partially successful, as we were approached by a number of VCs. However, they pretty much all told us the same thing: "Good presentation guys. Here's my card, let me know when you're further along in the process, when the final product is completed and you have actual users."
None of the investors seemed to understand the reason we joined the competition in the first place: To win money to help us actually develop our product. All of the nice smiles, firm handshakes and business cards were worthless, as we would never ever come up with the capital to be "further along in the process."
Boiling over, we took our frustrations to the dining hall to vent. It was there that by happenstance we were approached by Jack Grover, one of our fellow classmates who had seen our presentation at the competition. Jack, an active investor and founder of Grover Capital, was interested in dolling out more than just congratulations. At the time, Han and I were completely unaware of Jack's interest in entrepreneurship and particularly startups. Needless to say, Jack offered to fully fund the development of the Ratifye website and the rest, as they say, is history.
It's imperative for young entrepreneurs to look beyond what is considered the "normal route" in business, especially as they seek that crucial first investment. After all, what is normal? You don't often hear about the unsuccessful pitches from entrepreneurs attempting to win funding for their ideas, you only hear about the victories.
So even though it's easy to feel down about missing the mark, the truth is that sometimes even an endless amount of preparation, research and rehearsal still doesn't do the trick.
Startups find their footing in myriad ways, securing capital should be no different. Just because you strike out with one group of investors doesn't prevent other doors from opening. Remember, opportunity can strike when you least expect it.
Here are my four tips for finding a first investor:
- 1. Opportunity comes unexpectedly, so prepare for the unexpected. Being flexible as an entrepreneur is crucial to the success of your business, and it's important to remember that the simplest conversations can transform into an opportunity. Don't take anything for granted.
- 3. The conventional wisdom was once unconventional experimentation. When it comes down to it, an investment is an investment. Look past the typical business competitions and venture accelerators and don't be afraid to try your own unique approaches as you pursue an investment. Some investors actually appreciate young entrepreneurs with the confidence and ability to try out new things.
- 3. Don't get bogged down by your business plan. Don't get me wrong, business plans and rocket pitches are important, but being strategic in your pursuit of an investment is even more critical. Research, prepare and execute your plan. Investors will soon take notice.
- 4. Don't give up: Rejection is a huge part of entrepreneurship. Believing in your idea is probably the most important asset to have as an entrepreneur. It's proven that investors invest in the belief and passion that they see in you, more so than the idea itself.
Eric Muli is a senior at Babson College majoring in Economics and Marketing. As a Kenyan entrepreneur, Muli has developed a strong passion for community development and impact investing and participates in a variety of community uplifting projects in both Kenya and the United States. He is currently the president of Africa's first rating and review platform, Zabamba. He is hoping to launch a similar platform for college students in the United States.