You’ve finally found your passion and launched that dream business only to find it challenging to get funding. You’re scratching your head because you have a solid business plan, yet the dollars aren’t rolling in. The truth is that potential investors look at you, the entrepreneur, as the investment. Not the business idea. In other words, potential investors tend to bet on the jockey, not the horse. An interesting study conducted by Stanford Graduate School of Business professor Shai Bernstein focused on identifying the specific startup characteristics that are important to investors in early-stage firms. The results indicated that investors were most influenced by information about the founders. In fact, the most experienced and successful investors chose to respond only to information about the founding team. That’s why it’s essential to understand what small business investors are looking for so you can make yourself as attractive as possible.
Develop a robust network
The first thing potential investors will do is investigate you, the founder. One way they will do this is to research whom you know and what they say about you. Investors understand that it’s impossible to build a successful business in a vacuum. By having an extensive, well-connected network, you will give them the confidence they need to invest in your business.
Understand your audience
Conduct thorough research on potential investors. What are they like as individuals? Have they invested in ideas like yours in the past? Get to know them well enough that you can interact with them on a personal level. Good sources to learn about angel investors are AngelList, Flashfunders and SeedInvest. Find investors with interests and values that mirror yours, and your chances of success will increase significantly.
Build a strong social media presence
A strong, positive social media presence can entice investors. Connect with them through LinkedIn and Twitter and let your personality shine through. Social media is also an excellent way to get to know your potential investors. Make a note of topics they post about frequently, then use them during your pitch to show that your values and ideas mesh with theirs.
Prove you can be fiscally responsible
Investors are looking for someone that can not only manage their money but grow it significantly. Show them that you have proven success in this area. What past wins demonstrate that you have what it takes to make your business profitable? Small business investors may also look at your personal finances, such as your credit score, debt-to-income ratio, personal assets and the amount of money that you have invested in the business. A good financial record will help make you a more attractive investment.
Show you can execute flawlessly
Ideas are abundant, but people who can execute them are not. Steve Jobs once said, “To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.” What experience do you have taking a great idea and bringing it to fruition? Does the founding team have a track record of executing flawlessly?
Create a great pitch and practice, practice, practice
A written business plan is essential when pitching to small business investors and venture capital firms. Early-stage investors might see thousands of business plans a year that they must somehow narrow down to 100 meetings and then to maybe four companies in which they invest. That’s why your plan needs to be very succinct—about 15-20 pages long. Then you need to rehearse—a lot. Record yourself on video. Make sure the timing is right. Double-check your financials to ensure they are realistic. Practicing in front of an audience (even your significant other) is also a great help. Remember, it’s not just about presenting slides—it’s about telling an engaging story.
Displaying confidence is crucial when pitching potential small business investors. Don’t seem nervous or apologetic. If you have done your homework, then you will know your deck backward and forward. The key is to go in with the understanding that you’re building something amazing, and you’re doing the investors a favor by approaching them about it. Also, leave your ego at the door. You want to appear extremely confident, but not arrogant.
People invest first because they like you and second because they like your idea. It’s important to remember that you will probably get a lot of “no’s” before you get to “yes.” Just know your stuff, stay positive, and don’t give up. With the right amount of passion, preparation and persistence, you’ll be able to turn your vision into a legacy you can be proud of.
If you’ve been thinking about being your own boss for a while but aren’t sure if it’s the right time, download my free guide: 5 Signs It’s Time to Leave Your Soul-Sucking Job!