During the Seedstars Summit last week, start-ups had the opportunity to meet and engage with investors. However, one must think twice before partnering up his start-up. We wrote down some advices for new start-ups in search for funds.
What is investment ? A mix of art, science and… gambling.
An investor will have feelings about an idea, a project. This first impression is what will attract him towards your venture instead of others.
Then he will take in consideration all the information he is given to analyse the viability and the profitability of your project. He will not be at your side just because he likes you as a human being. He is doing business, not charity, and the main thing he will look for is potential customers. The other parameters such as motivation, the people you are working with or the « revolutionary » aspects of your product will not interest him in the first place. He wants to invest in a company that sells, and for that you need a market for your goods or services.
But investment is not without risk, and the people who might invest in a project are also gambling on the future. Of course everyone try to minimize it, but it is impossible to take into account every parameters. Investors will try to look for entrepreneurs they can trust, entrepreneurs who have the X factor, the small indefinable variable that might convince him.
If you are looking for investors, remember that you have to build a relationship with them. This relationship is like marriage. Sometimes you live happily ever after in a big castle, sometimes it is long and hard to make it work, but often it ends in divorce. But like every relationship, you have to work hard to gain trust and respect to strengthen this collaboration.
Advices to find investors
- Create a strategic list of potential investors
Your project will probably be one amongst hundreds read by investors. To palliate this, you need to have a wide audience by finding lots of different potential partners.But don’t chose any random investors. Find the ones that have already invested in the same sector as your future company, but not directly in competition. An investor is not only someone who gives you money, but someone who will help with his experience to make sure he get a return on his investment.
- Develop your business plan to stand out
Investors receive dozens of projects every day. To stand out, your plan needs to explain clearly what your business will do, who are the targeted customers, alongside with projected sales for the next few years. Don’t let anything to approximation, you’re entering a professional world : university is over.Hiring a consultant who has experienced success in startups launch (if financially possible) will help you being convincing and credible.
- Demonstrate why your startup is different
If your business relies on a patent or a trade secret, this idea should be enough to stand out in the eyes of an investor.However, many startups are not developing a revolutionary tech, but simply using what already exists but in a different way. In this case, you have to insist on what makes you different. Demonstrate that your way of thinking a business is unique from the competition, that you offer something different, better, or meeting an unfulfilled need of society.