More than the business model, investors invest in the entrepreneur, his passion, his risk appetite and a solid team backing the idea. They prefer investing in a B+ plan with an A+ team rather than an A+ plan with a B+ team.
Entrepreneur India for its readers has pen down 5 tips for startups to attract investors:
1. Get Your Idea Validated
If an entrepreneur is able to translate his/her idea into a customer proposition – customers are ready to pay for that idea or product, then investors are always ready to invest. This can happen by business getting incubated where entrepreneurs get support system of mentors for translating their idea into a proof of concept. After this, the hope of raising money increases.
2. Show Conviction
Business plan only gives investors the idea of entrepreneurs’ financial competencies. However, investors do not look at your business plan, the weightage to that is very low. The most important aspect is the conviction and persistence an entrepreneur demonstrates to execute that business plan.
3. Have a Large Risk Appetite
What is your capability of taking risks at all levels of business is one of the elements that investors need to understand from you. It means an investor will like to know whether you have thought about every possible risk that you could come across in the future and have a solution for that.
4 Get a Team More Competent Than You
If you can have around three-four people with you who are convinced of your business model and if you can get a co-founder along with you, the investors’ conviction to invest in you increases. Moreover, in order to implement the idea, an entrepreneur needs a cohesive team with complete clarity in terms of leadership within the team.
5. Get Proper Valuation
Raising capital means equity dilution that depends on the valuation that you get from the investor. It is important to arrive at a balance between the valuation you seek and the valuation given by the investor because too much equity dilution will make capital raising more difficult in the future as you will have lesser stake in your own company to dilute.