Investing in a business is a big decision for any potential investor.
They not only want to feel confident in the product or service the business is offering, but they also want to be confident in the team behind the business.
In order to raise capital and find investors, it is crucial that entrepreneurs know how to pitch their business in a way that will instill confidence and trust.
Keep reading for the top tips on how to find investors and raise capital for your business.
TIP 1: Define Your Investment Needs
The first step in finding investors is defining how much money you need to raise.
This will help you determine what type of investment you’re looking for and give you a ballpark figure for how much equity you’re willing to give up.
When it’s time to ask for the money, a plan matters…
Here I was, I had a $50-million-a-year business, making $5 million a year in profit, and I walked in and met with seven banks to get some financing.
I thought it was going to be easy because I had this nice business, this extremely profitable business.
Unfortunately, bank after bank after bank turned me down.
I had great credit and all that.
The only asset I had was the business.
Part of the problem was I didn’t know how to approach these banks.
I was a young entrepreneur in my twenties, I had no real credibility in the banking world, and I was walking in and just showing my numbers from the year before.
So what did I do to get the capital?
Well, I ran into a mentor who was a former bank president, and he said, “Kevin, you went about it all wrong. I come from the banking business, and if you walked into my office and said you needed $5 million, I would have told you to turn around and get the hell out of my office. What you have to do, well, it isn’t what you did last year. You have to sell them on the future. What you did last year is well and good, but they are giving you money, and you have to understand that you are still going to be in business three years from now repaying their loans. You need projections, you need your forward business plan, you need your five-year master plan. You need to talk the talk and walk the walk, otherwise they aren’t even interested.”
You need projections, you need your forward business plan, you need your five-year master plan.
Once you a clear idea of your investment needs, you can start developing your pitch.
TIP 2: Create a Compelling Pitch Deck
Your pitch deck is one of the most important tools you have when it comes to raising capital.
This is what you’ll use to present your business to potential investors and get them excited about investing in your company.
Make sure your pitch deck is clear, concise, and visually appealing.
You should also practice delivering your pitch multiple times so that you’re comfortable and confident when presenting to investors.
Raising capital is mental. It’s in the pitch; it’s in the relationships, etc.
Here’s the thing, even though I have made thousands upon thousands of pitches, have spoken to thousands of people, and have seen a great amount of success, I still pitch myself and my businesses.
No matter who you are, or what you do, you have to be ready to drop the perfect pitch, and it doesn’t matter if you are going to make this perfect pitch in front of a crowd of thousands or a crowd of one.
To help with the concept of a perfect pitch, I have created a 10-step system to develop your perfect pitch.
Before you can start perfecting the perfect pitch, you first have to ask yourself a couple of questions. What are you pitching?
In other words, what product, business, or service are you trying to sell?
Next, what do you want to get out of this pitch? More customers? More sales?
Nonetheless, these questions are for you to answer, and you need to answer them before devising your perfect pitch.
TIP 3: Know Your Target Investor
Not all investors are created equal.
There are different types of investors out there, each with their own motivations and expectations.
It’s important that you know who your target investor is before reaching out.
This way, you can tailor your pitch specifically to them and increase your chances of getting funded.
Some common types of investors include venture capitalists, angel investors, and private equity firms.
Ask this number one question……
Who is your product for?
Demographics like gender, age, location, and income are important factors to consider.
Once you know who your target market is, you can better understand their needs and wants.
For example, if you are selling a women’s fashion line, you’ll want to gear your marketing towards females instead of targeting everyone.
Understanding your target market can help you fine-tune your branding and messaging, and make it easier to connect with potential customers.
TIP 4: Reach Out To Potential Investors
Once you’ve defined your investment needs, created a compelling pitch deck, and identified your target investor, it’s time to start reaching out.
The best way to do this is through personal introductions from people the investor knows and trusts.
If you don’t have any personal connections, try attending industry events or reaching out through social media platforms like LinkedIn.
When reaching out, be polite and professional while still showing off your personality—you want the investor to like you as well as believe in your business!
There is a possibility that finding investors will take longer than you think.
In order to win, you must attack from every angle and keep trying.
We’ve got a few suggestions to help get you started when it comes to finding funding:
- Angel Investors
- Reach Out to Friends and Family
- Go Straight to the Investment Bankers
- Attend Conferences, Networking Sessions, and Events
- Find and Ask a Mentor
TIP 5: Negotiate Terms & Close the Deal
If an investor decides they’re interested in funding your business, it’s time to start negotiating terms.
This is where having a clear understanding of what you want (and what you’re willing to give up) comes in handy.
Once both parties are happy with the terms of the deal, it’s time to close it!
Make sure everything is in writing so that there are no misunderstandings down the road.
And remember this: THE DEAL MUST BE A WIN-WIN (for both parties involved)!!
Raising capital for your business can seem like a daunting task, but with a solid plan in place, it doesn’t have to be.
If you’re looking for ways to find investors and raise capital for your business, following these tips is a great place to start.
By having a clear understanding of your business and what you’re looking to achieve, you’ll be better positioned to make meaningful connections with potential investors.
By following the steps outlined above, you’ll be on your way to raising capital for your business in no time!