Founders – when seeking investment for your startup, it’s crucial that you look at it from an investor’s perspective. Before making the big decision to fund your newest venture, investors, understandably, check multiple things are in place to make sure giving you their cash is going to be worthwhile and wise.
How can you pitch yourself as a founder with a memorable proposition and remain in investors’ minds as a conscientious, aspirational, and driven leader?
The advice to stand out from the crowd isn’t always clear-cut, so based on my experience, I’ve set out the key things that investors look for and what you can do to stand out.
A clear and balanced vision
In the early stages, the only tangible thing you have is yourself and your vision. Ultimately, an investor will only put money in if they believe your vision will realistically result in success. This is why you need to present a strong plan for the future, delivered with a passion for how you think you’ll get there, and all of it seems realistic and achievable.
If your proposition is too grand, it often becomes difficult for the investor to visualise, and they’re more likely not to buy into it. On the other hand, if your vision is lacklustre, then it wouldn’t be surprising if investors walked away. The solution is to present a well-balanced plan – grand enough that the investor sees value in your proposition, without it sounding unachievable.
The right temperament
In business, it’s as much about relations as it is numbers. Many investors who get involved in early-stage investments are betting on how you are, rather than what you present. You’ll want to present yourself in an approachable way that makes investors enthusiastic about trusting you with their money. You need to consider that investors aren’t just judging you on your vision, they’re assessing whether you can quickly adapt and change your plans when you discover what works and what doesn’t.
Investors are looking for founders who love making decisions, will rapidly use data to change their minds,s and most importantly, aren’t too full of themselves. Again it’s about finding the right balance so you come across as confident but not arrogant, driven but not obsessed, and smart but humble.
The ability to make carefully considered decisions
Investors look for honest leaders who have a healthy level of ambition and drive and are level-headed when making decisions. Investors want to know that the risk they’re taking won’t be too big – they don’t want to back a leader who will make spontaneous decisions that are detrimental to the business.
There are many ways for investors to test this. One method is to critique something in your plan. This could be by asking, ‘how are you different from a competitor?’ or ‘why would people buy into this?’ Be careful here – if you get defensive about answering these questions, or just don’t answer at all, you’ll be raising a big red flag. If you take the time to consider your answers and reply with a well-reasoned suggestion, you’ll put yourself in a better position.
If you’re defensive, especially early on, investors are unlikely to believe in you. In the early stages of building any business, things don’t always go to plan. Investors are right that you’ll need to be reactive and willing to change what you’re doing or you’ll waste money chasing an impossible dream.
A solid business plan, appropriate for your sector
At an early stage, inventors are gathering information on what is realistic and measurable – for this, they’ll look at your business plan. For early-stage companies, it’s no secret that the five-year business plan is made up. There’s no tangible evidence to base your plan on, and essentially, you’ve made up some numbers. You should never decide on a valuation based on made-up numbers. However, investors can still gather information about your proposition from these made-up numbers. Your business plan demonstrates your ability to handle numbers as well as your level of ambition. If your valuation shows £100million a year in revenue in year 5, then this shows that you’re either super ambitious or innumerate with no understanding of where your business will realistically be after five years. If your five-year plan shows £1million a year revenue after year five, then this might be great for you and you could pay yourself a nice salary, but investors won’t be interested – many look for a return of 10x or more.
However, the business plan alone is not enough to know whether you’re investable – investors need to understand whether your plan makes sense for the sector you’re operating in. For example, med-tech might have zero revenue for five years while waiting for FDA approval, whereas businesses in other sectors could grow quickly and then plateau.
An in-depth understanding of your product or service
Ask yourself, ‘am I the customer?’ If you’re an avid user of your product, that’s a great sign. However, if you’re making your product for others, whether that’s a different age group or profession, then investors know that this makes things more difficult. Why? If you’re the customer, you make your product something that works for you, and if you’re representative of many other people, then they’ll want it too. If you’re making a product for older people but you’re young and just working on a hunch, investors will predict that you’ll spend endless amounts of time with customers and your team, making everything more challenging and time-consuming.
The way you present yourself is as important as the business you’re growing. Investors are putting their cash behind you just as much as your company. The number of founders looking for investment is increasing at an alarming rate so now more than ever, you need to stand out. Present yourself to emphasise your deep understanding of your plans and sector, your realistic ambition, and your genuine enthusiasm. You’re aiming for the Goldilocks zone – not too much, not too little, but that ‘just right’ amount that investors love.
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