Startup businesses often rely on investments. However, most people don’t have massive sums laying around with which to start a new venture. Instead, they must source investments from those around them. Whether they are pitching to angel investors, venture capital investors or even family and friends, getting people to invest can be a massive undertaking.
Considering that getting it right or wrong could quite literally make or break your business, it is important to have as much information on the art of the pitch as possible. To help, these eight members of Young Entrepreneur Council share their most effective tips for startup fund sourcing.
I’ve raised billions across funds, startups and alternatives and I see the same thing happen constantly. Founders forget it’s all about the money. I always joke that only your mom wants to fund your dreams. We investors want to fund your future revenue. The truth is that real founders don’t pitch ideas and dreams; they pitch proven business models and, even better, ones with revenue and traction. Real founders know that investors are there to make a return. It is a trade of our money for your time. What that means is you need to show a very clear path to profitability and outsize returns that you can explain inside and out. Profits and pipe dreams. – Codie Sanchez, Www.CodieSanchez.com
2. Know your audience.
Take the time to find out who you’ll be pitching ahead of the meeting and do some research. If your company is in education, for example, and your research shows that they have children, adapt your pitch to appeal to their pain point as a parent. Perhaps your company improves early cancer detection and your research shows they’ve lost a loved one to cancer; adapt your pitch to include a heartfelt story about the lives your company will save. It’s all about the story that you tell. If you can find a way to make it relevant to their personal experiences, there is a much higher probability of securing an investment. I hear thousands of pitches every year and the most successful ones are those that appeal to me personally. – Gene Swank, ScreenTime Solutions
3. Focus more on improving.
When I started to gain more passion for my service and thought of new ways to really become a thought leader in my industry, I noticed that it was making an impact on investors. Whether they heard from my customers or industry news, I was contacted by investors after six months of being in business. Before I started my business, I was in the ideation stage and was constantly hoping for investors to notice me and invest. I went to countless meetings and left with zero results. It drove me nuts and tested my patience. Then I told myself I was going to keep working on my passion whether investors were going to be involved or not. After a few months, I was speaking on a panel and the investors were interested. – Sweta Patel, Silicon Valley Startup Marketing
4. Have a detailed record of your business.
This is exactly why it’s so important for businesses to track, record and register their accounts from day one. While investors will have their eyes on future profits and potential, they need to see that they are investing in a serious business. Having a clear history of your business, even if you are losing money, shows investors its true potential. If an investor cannot see an honest picture of your business, then they will not invest. From my own experience, I would try to keep family out of investing because they probably would invest in a business out of love, not logic, and that could lead to an enormous personal burden. – Ismael Wrixen, FE International
5. Ask for help.
If you don’t ask for help, you won’t get any. I ran into the end of my line of credit at the bank while expanding my massage studios. I asked my Facebook community if anyone was interested in giving a loan with interest, and was surprised and thrilled by how many friends were willing to lend me money. I chose a friend from high school with a long history and paid him back in full with interest before the year was up. You only get what you ask for. – Rachel Beider, Massage Outpost
6. Network meaningfully.
Although investors are used to pitches, that doesn’t mean they like to add someone on LinkedIn and immediately be barraged with a pitch. Organic and strong relationships are often formed through meaningful networking. In the case of my company, that’s how it happened. I met a few contacts through social gatherings, and the conversation organically moved to what my company did and what it needed. The buy-in was not just about the money that could potentially be made, but more about a shared vision and a pathos buy-in. Sharing more than just dollars and cents with your potential investors makes success all the sweeter, and on a practical side makes it more likely for second- and third-round investing. – Brandon Stapper, Nonstop Signs
7. Appreciate all contributions.
I started my business in 2010 without financial backing or any savings. I took a giant leap of faith, quit my day job and went off on my own to start a songwriting school for kids. I started a Kickstarter campaign (it was the early days of crowdsourced funding) and in a couple weeks, raised a few thousand dollars in startup, no-strings-attached capital. Friends, family and even some early clients were happy to step up and contribute given the opportunity. Every contribution that came in felt like another boost upward on my journey toward entrepreneurship. A few thousand dollars sounds like a small nest egg with which start a business, but the support from those around me felt like a million bucks! – Rachel Lipson, Blue Balloon Songwriting for Small People
8. Be humble and adaptable.
I believe that one of the most important attributes that angel investors are looking for is the ability to be coachable. When an investor sees that the the founder appears to know it all and is arrogant, it pushes them away. Generally the one looking for investment has less experience than the investor. Even though the founder may have great ideas, they haven’t yet been hit by the “school of hard knocks.” I experienced this firsthand. I was once pitching to a group of investors and gave what I thought was a very compelling pitch. An investor asked me, “But what happens if you can’t deliver?” My answer was: “We will deliver. We’re going to do it.” The investor didn’t like that answer and that was the end of the potential investment. Humility makes you a much more compelling investment. – Tyler Gallagher, Regal Assets
Read more: Forbes