Whether you’re looking to launch a snazzy new mobile app or build a resort, investors are all looking for the same basic things — marketability, sustainability, good planning, and passion.
It simply isn’t enough to have a great idea. Investors want to know that you have the skills and knowledge to take your concept all the way from idea to solid success. Great preparation is the key to getting noticed, so you’ll want to do your research, prepare a solid business plan, and be ready for that all-important face-to-face meeting.
Know your stuff
Know your product or service inside and out. If you plan to sell a physical product, you probably need to make a few prototypes or models first. Ask people what they think (preferably not family or friends, who might be too kind to tell you about any flaws your product might have). Ask them if they would buy it. What price would they pay for it? Where are you going to have it manufactured? What materials will it be made of? How much will engineering and production cost?
If your product is a service or service franchise, get out there and perform the service for potential customers. How can you improve it? What is it about your service that will be unique to your business?
Think ahead, plan, and start talking to suppliers, manufacturers, design firms, packagers, and wholesalers. Learn your business from launch to landing before you start talking to investors.
Create a solid business plan
The most important tool in your arsenal is going to be your business plan. Basically, it all comes down to asking for a set amount of money, explaining how you plan to use it, and then proving that you have the chops to get there.
Your business plan should identify clear revenue streams. Once the investment money has been spent, how is the company going to keep going? How are you going to meet payroll? What if something goes wrong? Investors like to see multiple revenue streams, so that if something goes wrong with one product, the company can make up for it elsewhere.
Every business plan should include a SWOT analysis. SWOT, as you might know, stands for “strengths, weaknesses, opportunities, and threats.”
Alex Motola, a private investor, says “A well-written business plan is probably the most important thing outside of an actual face-to-face meeting with current owners and managers of the business. Anything that is too ‘salesy’ is a death knell to me. I want to invest with passionate and honest operators, not slick salesman CEOs. Genuineness matters.”
The power of a good executive summary
When it comes to getting venture capital, there is no more powerful tool than the executive summary. It should be no more than three to five pages long, and since many venture capitalists will not even look at a full business plan unless the summary intrigues them, you must take advantage of every line to convince them to take a closer look at your business.
“Executive summaries should be concise and target the opportunities for the company, as well as the benefits to the new investors,” says Motola. “Fifteen minutes in, I can tell how interested I am in an investment. I typically read the summary first, then the financial model, and then dial in on what I perceive to be the relevant aspects of hitting the financial targets, depending on the kind of business.”
You’ll want to cover the nuts and bolts well enough to demonstrate that your proposal is well-documented and that you and your team have the experience the project requires, but you should also try to be brief. Use this space to list every positive reason for investing that you can think of — benefits to the consumer, market demand and interest, and competitive opportunities.
Game plan for live presentations
Once you’ve passed the initial examination by venture capitalists or angel investors, you may be asked to come in and give a verbal presentation.
If you are planning on producing a PowerPoint presentation or a video, keep it short, around 5 minutes or so.
Other items you will want to have ready for a presentation may include a working model, prototypes, and samples. Be sure your website is operational and looking fabulous. Investors want to see that you understand the importance of a solid internet and social media presence. If you have taken the time and forethought to build a social media campaign and some anticipation for your concept, even better.
Motola agrees. “Deep knowledge of the market is extremely important. One of the worst impressions a potential investor can be left with is that the management doesn’t understand their market and competition, or are overly dismissive of it. Paranoia is a great trait in a manager, and so is obsessiveness with their products. I’m invested in a company which makes the best knife sharpeners available, and the CEO is insanely aware of his competitors, his customers — he is completely redefining a pretty mundane industry. He also has more integrity than 99.9 percent of all the people I’ve ever met. That’s exactly the kind of person I want to invest in and with.”
Success breeds success
Investors like to hear that you have had some success, so beat your drum as loudly as possible. If you’ve already begun selling your product and you have an interested market, show them. If you have launched successful ventures before, that’s also important. Don’t be shy about mentioning your prior successes and experience, even if they were in unrelated fields.
Of course, getting assistance from angel investors is just one way that you can receive help with funding – find out more in our “Funding” section.