Tapping Investment Capital: How Entrepreneurs Can Attract Investors
All entrepreneurs of any start-up know that acquiring capital presents an existential challenge to their business. This existential challenge inconveniently starts at a high level during a start-up’s conceptual phase, when potential investors are unaware of the product or services as well as the founder’s vision, acumen, and abilities. However, there are a few practices entrepreneurs can employ when searching for venture capitalists or angel investors. Successful implementation of these strategies can attract both attention and capital of firms or individuals with experience investing in start-ups
The first task of nailing down funding is connecting with venture capitalists and investors or securing small business grants and loans. However, before the successful procurement of external capital of any source, entrepreneurs must have a solid business plan that demonstrates a knowledge of who their product will serve (target consumer), what the product will do, when the product will be released, where the product’s target markets are located, why target consumers will demand their product, and how that product will overcome inevitable hurdles. By answering these simple questions, entrepreneurs are thus able to develop a narrative about their product; this is commonly known in the start-up world as a pitch-deck, but a closer look behind the flashy start-up nomenclature reveals this is nothing more than a story about one’s product, and how it will drive demand. This will give entrepreneurs an idea of future cash flows and other financial projects, which are crucial in attracting further start-up investment.
After developing how their product will drive demand and thus be of value, entrepreneurs need to recruit a solid, well-rounded team, and more importantly, demonstrate that they are capable of leading that team. Doing this will demonstrate to investors that they can effectively tackle inevitable problems that arise. Software engineers smash bugs and implement updates, financial managers process invoices and ensure suppliers receive payment, and a sales and marketing team kick-starts and maintains growth. Thus, demonstrating to VC firms, angel investors or private equity groups a commitment to sound operations through the existence of a solid team will go a long way.
After developing a product, projecting demand, determining cash flow, and assembling a team, entrepreneurs can potentially find themselves in a position to raise more capital. While options exist for small business loans and grants, larger volumes and capital and greater market exposure stem from securing funding from VC firms and other angel investors. Crowd-funding sites like AngelList, Wefunder, and SeedInvest provide entrepreneurs with many options for raising capital, but securing VC firms and Angel Investors takes networking skills. Thus, social media is a great conduit for building relationships with possible sources of capital; LinkedIn has numerous groups that entrepreneurs can join which connect them to sources of money, and a well-crafted Instagram campaign can potentially raise VC eyebrows. These social media sites also provide leads and information about trade shows and other opportunities to maximize exposure to sources of capital.
Ultimately, entrepreneurs must have a solid business plan which they can pitch on a moment’s notice, along with the skill to assemble and lead an effective team. Successfully coupling these two points together displays competence and ability, which will help win the hearts of those willing to invest large amounts of capital.