A great business idea and favorable market scenarios still require entrepreneurs to seek out financial support in order to put their startups to work. This is because building a company from the ground up can be quite a tedious task.
You need a workplace for your staff, office equipment, stationery, furniture, and various other expenses to cater to as well. All of these, along with technical gadgets and computing devices along with monthly bills for utilities, can be quite nerve-wracking to handle.
This is where startup financers come into play and provide businesses with substantial support to make them survive during their early years of operations.
According to a recent study by Embroker, the average time duration amid funding rounds from Seed to Series A is 22 months. It takes 24 months to reach from Series A to B and almost 27 months from Series B to C. In addition to this, 47% of the startups classified as Series A invest nearly $400,000 or more per month.
With that out of the way, let’s take a quick look at some of the ways you can attract startup financiers to help you out in bringing your business idea to fruition.
1. Angel Investors vs Venture Capitalist
First and foremost let’s differentiate between Angel Investors and Venture Capitalists. While both are able to invest finances for your business proposal in hopes of earning a healthy ROI, angel investors are able to pool substantially fewer amounts as compared to venture capitalists. Likewise, the return expectations for venture capitalists are also higher.
A venture capitalist may represent a firm that operates on the specific purpose of supporting small companies, while angel investors are individuals who use their own money to invest in your business.
Since angel investors focus on helping someone build their business rather than profiting right away, their terms and conditions are also considerably more reasonable than as compared to those of ventured capitalists.
The choice depends on your own unique judgment and case scenario.
2. Commendable Market Research
Suppose you want to persuade someone to invest in your business idea. In that case, you need to provide them with solid facts, information, and all-inclusive market research to support your claims that make your venture profitable in the first place.
This contains more than competitor data such as target audience breakdown, market segmentation, SWOT analysis, existing demand and supply forces of the market, and various other variables.
You need to deliver a foolproof business plan that provides assurances against adverse conditions and take into account unforeseen events such as recovery from a natural disaster or market failure.
The more resolute you are in your research, the more grasp you have on the real-life implications of going ahead with your business plan. Investors need to know it all, so you have to be spot on with your deductions.
3. Fundraising Platforms (Online)
Talking about crowdfunding, the best place to get familiarized with the right people is to propose your idea to an online funding platform. Some of the best fundraising platforms online include:
Crowdfunding usually works in a way where businesses are able to raise money through individuals and organizations that donate/invest sums of money for their proposals or projects.
In return, these donors are not only protected for fraud by some domains but also receive a substantial share of profits or potential earnings as a reward. In order to attract investors, you need to establish a resolute financial model to make investors understand what is at stake here.
Address possible risks related to your business plan and stay completely honest to your potential stakeholders.
4. Digitally Market Your Idea
We are living in a world that is becoming connected increasingly through digital channels, including social media, blogs, user-generated content websites, and various other avenues.
If you want to create a buzz around your new idea, then you can start hinting about it to people and see what response you get from them. This might open doors for you to crowdfund your project.
While many professionals in the field would criticize the choice of crowdfunding your startup, the thing is that desperate times call for desperate measures. However, there are times when this can actually help you get acquainted with capable entities that can help you out with your startup idea.
Putting the word out there on the internet will naturally help you to reach people from a much wide audience.
5. Host Events
A professional approach is also to shortlist the most probable investors that you consider are capable of investing in your business idea. Next, you can host events where you can invite these esteemed guests and provide them with a well-planned presentation regarding the proposal.
You can also hold private dinners at hotels or face to face meetings with several people or even individual entities.
Technology is a boon so you can use it to create a private group where you can add their contacts and reach out to them in a secluded and protected environment without risking that your business idea may leak out into a competitor’s hand.
Even a webinar for a selected audience would be a great idea where you can pitch your idea and let the facts do the talking for you.
6. Join an Accelerator Program
Also known as seed accelerators, these programs are cohort-based, fixed-term, and may include mentorship. You can meet business incubators through a public pitch event or demo day, and you can usually end up being funded by the government body.
Otherwise, you have the opportunity to pique the interest of public or privately held entities that may belong from a wide range of industries.
Startup accelerators are, however, open for anyone with a good enough business idea; however, getting funded is through a highly competitive process. Today we even have corporate accelerators that deal with larger corporations and are in need of finances to support their subsidiary projects.
7. Offer a Partnership
There is no doubt that investors would only invest in your business idea only when they consider the ROI your proposal claims to deliver.
However, you can top this up with an offer to become a co-founder or a business partner to a suitable source that you find would be able to provide tremendous support for your venture.
Playing the role of a business partner would then require them to share not only the profits but also the risk involved in the loss of business opportunity. Furthermore choosing the right people to become your business partner can put you in a favorable position to continue receiving support from them in times of need.
8. Pitch the ROI (Return on Investment)
As mentioned before, ROI that your business is able to generate once in reaches full motion is what really attracts people to invest in your proposal in the first place.
Here are some tips regarding how you should pitch your startup idea to investors:
- Keep your pitch simple, to the point, and precise.
- Bring to the table a passionate story that is memorable and unique.
- Convey the value behind your proposal and what makes it unique.
- Provide samples or tests of your products if you can to let experience what you have in store for them. Demonstrations can do wonders.
- Make sure that you don’t offend your target audience in any way, so study them well beforehand.
- Always present honest, factual information and never refrain from telling the truth and complete truth backed by scientific evidence and market research. Do not exaggerate.
- Close with a strong call to action and summaries your pitch so that you deliver the takeaway from your presentation.
- You can use a pitch deck to great use here.
9. Soft Selling via Networking
Lastly, there is no question about the fact that having a blooming business network puts you in a favorable position to connect with a lot of people within the industry and even outside your niche market.
You can use soft selling technique with them to subtly mention your ideas that is both friendly and casual. This is the opposite approach of hard sell where you attack aggressively and be extremely blunt with your approach. This is a much gentler approach because you want to observe their reaction first and then proceed.
Tread softly, or you will find yourself swimming through dangerous waters in case you end up offending someone. Students who buy coursework online also use soft-selling techniques to acquire odds jobs and part-time shifts to pay for their rent and other daily expenses during learning years.
No one likes to ask for financial support, but there is a difference between out-front begging for support or simply placing a reasonable request.
The way you manage your entire conduct and act is extremely important as you don’t want to sound as too desperate as this is considered as a vulnerability that can be exploited by those with mischievous intent.
The balance lies in remaining dignified and making your startup idea look like the most attractive offer in the world.
Claudia Jeffrey is presently engaged in fulfilling her duties as a Sr. Research Analyst at Crowd Writer. This is where higher education students can request for professional assignment help from experts. She likes to play indoor sports during her leisure time and is a self-proclaimed master at ping pong.