Eight Tactics Entrepreneurs Can Use To Improve Their Chances Of Getting Funded
Attracting funding bridges the gap between having a great idea and building a successful business.
As the majority of founders will have experienced on their entrepreneurial journey, it's difficult to launch a successful business without some form of funding. Even if you do have a meticulous plan, that is often just the beginning– it's the investment that brings an idea to life. Attracting funding bridges the gap between having a great idea and building a successful business. So, what can entrepreneurs do to actually achieve that funding? Here's a primer.
1. START THE CONVERSATION Sending an email blast to hundreds of investors will not work– simple. There's too much competition between entrepreneurs, and if you send out the same email over and over again, you're hardly going to stand out from the crowd.
The best way to connect with a potential investor is through their own network, for example, a colleague or a founder who has already benefitted from investment, although not everyone will have these contacts.
The next best option is to make a personal connection yourself. Many VCs are active on social media, so it's worth taking the time to follow them, find out more about them, and introduce yourself virtually. Make sure you show that you have done your research, familiarize yourself with their portfolio, background, and interests, and tailor your initial message. These conversations create awareness, build greater interest in your business, and increase your chances of receiving funding.
2. PREPARE Once you have an opportunity to pitch to an investor, you need to prepare thoroughly. It's a pretty obvious point to make, but you'd be amazed by the number of entrepreneurs I've met who have clearly only spent a few hours on their presentation. While I'm not expecting founders to slave away for weeks on end, a pitch should be well put together and informative. You need to pre-empt the questions an investor will ask and be able to answer them with confidence– investors will want to test your knowledge of your industry and business.
If you can't answer questions such as how much money your market generates, how you plan to scale your business, and how much disposable income your audience has, then investors will have no confidence in your abilities as a company founder. There are plenty of entrepreneurs out there looking for funding; if you can't demonstrate your value, there will always be someone who can.
3. MAKE IT PERSONAL Investors aren't inhumane monsters; we like to talk. Essentially a pitch meeting is about getting to know an entrepreneur and their business.
Be friendly and personable. I know it can be difficult to stay relaxed if you're nervous, but if an investor is going to invest in you, they need to get to know you on a professional level at least. Invite investors to ask questions during the presentation, or let them know that you're happy to discuss any points further if needed.
Remember, we're not just investing in your company; we're investing in you. It's important that we get to know you and believe in your vision.
4. TELL A STORY There can be a real lack of personal connection when it comes to pitching for investment– while charts and numbers on a spreadsheet includes key information about your organization, they don't tell an investor why you started your business, how you got to where you are, and the lessons you've learnt along the way.
Effective storytelling is one of the best ways to engage your audience. If you turn a pitch into a story, your business will be much more memorable, which is a big plus for investors who meet multiple founders every day. Tell the investor about you, your history, and what inspired you to start your company.
5. BE PASSIONATE When you walk into a meeting with an investor, you're asking them to put their trust and money into your idea, which is a lot to ask of a perfect stranger in most cases. To help sell yourself and your business, the best thing you can do is be passionate. If you're excited about what you've created, it's much easier for an investor to get onboard. Starting your own business is hard– it's one of the most challenging projects anyone can pursue. Without passion driving you, the wear and tear of entrepreneurial life can really grind you down. Passion is therefore one of the main characteristics I look for in an entrepreneur.
I want to see your eyes light up when you tell me about your idea, because behind every great business, is a passionate founder. If I can't see or feel the passion, then I know the business will likely fail.
6. UNDERSTAND YOUR SECTOR You need to know as much about your sector as possible. Not only to answer an investor's questions, but also to impress them. Investors want to know that you understand your industry– what's the market size and value, do you have competitors, what are your competitors doing in the space, what does your audience look like, etc. These are all important questions that investors are likely to ask, and that you should be able to answer.
As an investor, I expect the entrepreneur to be the expert in the room when it comes to their industry, even if I've invested in a similar sector. It's your job to educate and inform, giving me as much information as I need to help me reach a decision.
7. BE HONEST An essential part of any pitch should be about establishing credibility and trust, both in you as an entrepreneur, and your business. The best pitches will take the investor through failures alongside successes, how these issues were handled, and the lessons learnt from the experience.
Investors are effectively taking a chance on your business, so if you have made mistakes, can't answer every question, or your figures aren't quite what you'd like them to be, you shouldn't hide the truth, shy away, or exaggerate the numbers. An investor will know if you're trying to avoid a particular line of questioning, and it will lead them to wonder what else you're not telling them. Respect their intelligence, and be upfront.
8. BE REALISTIC One of the most important questions entrepreneurs need to ask themselves is: "How much money should I ask for?"
Some founders will start with a large sum and overestimate their needs, while others will underestimate their requirements in fear of putting off an investor by asking for too much money. Neither strategy is likely to result in success.
When sizing your request, you should consider the type of investor you're pitching to, the investment terms, your company stage, what you'll be using the funds for, and the projected return on investment. It's no easy task– if you're greedy or change your request under pressure, you will be at risk of losing your credibility, but it's one of the most crucial factors when it comes to securing funding.
Getting into the room is one thing– it's capturing an investor's attention that will set you up for success. Be as prepared as you can be, be passionate about your business and be honest about your journey, and you will really increase your chances of getting funded.