ENTREPRENEURSHIP / APR. 25, 2015
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How to Attract Investors for Your Startup

Nowadays, many business owners are seeking funding from angel investors. However, securing funding from such investors requires using the right approach. Here are some tips for attracting investors for your startup:

 

See also: How to Set Up a Low Cost Startup - Top 10 Ideas to Get you Started 

1. Write a proper business plan

When approaching an investor, it is not enough to have a good idea. You need to have a proper business plan clearly outlining your business model. In addition, it should mention your business goals and priorities, product scope, marketing strategy and revenue projections. Make sure your plan answers every question that could be asked by potential investors. Remember to keep it simple and avoid technical jargon.

2. Mobilize a well-rounded team

If your startup is a one-man show, investors are likely to frown upon it. To enhance your chances of securing funding, be sure to assemble a strong management team. The prospective investors should see this team as capable of accomplishing your business’ goals and vision. Therefore, be sure to select team members that have strong complementary skills. In addition, they should have some experience in there are of specialization.

3. Build an advisory board

Besides having a strong management team, it would also be advisable to build an advisory board. This board should be comprised of well-known individuals that have proven experience and valuable connections in your industry. Investors would be willing to put their money in a business which has smart people on board. They are likely to make some phone calls to ascertain that these individuals know your business and are committed to working with you.

4. Register your intellectual property

When it comes to company valuation, the value of your intellectual property is a major element. This value will prove to investors that you possess a ‘sustainable competitive advantage’ and thus their investment will be worthwhile. Therefore, be sure to register your company name and trademark, as well as file provisional patents for your innovations. Such procedures don’t cost much, but go a long way in showing prospective investors that you are serious about your business.  

5. Get a real customer

Potential investors will want to know how many units of your product have been sold and how much revenue was generated. Therefore, before seeking investor funding, get your product out there and make some real sales. Real customers are those who have paid the full price for the product and have actually used it. The number of free samples you have given out does not matter to investors.

6. Obtain letters of endorsement or intent

If you don’t have too many real customers, a written endorsement or letter of intent from a major customer can help you attract the attention of potential investors. This will show that there is someone actually interested in what you have to offer. A purchase order or contract from a big customer would be even more effective.

7. Show ‘sweat equity’

Before they pump money in your idea, investors would want to see how much personal investment you have made. If you haven’t put much time and effort in the venture, then they are not likely to take you seriously. Investors usually work with business owners that have shown strong commitment to their ventures.  

If you get a ‘No’ the first time you approach an investor, don’t give up. At times, they might ask you to come back after you have signed some customers or finished your product. When such conditions are fulfilled, they might then be willing to put in their money.

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