For entrepreneurs, money isn’t the root of all evil. It’s probably more accurate to say that the lack of money is the most likely reason for a startup to fail. One common mistake for entrepreneurs is that they don’t start as early as they can in rounding up the investment money they need.
If you’re starting your own business, then your preparations must also include finding out how you can attract investors to your new business idea. Here are some steps you must consider:
1. Identify Your Suitable Investors
You should do some research on who the likely investors are for your industry and sector. For example, some investors specialize only in high tech firms, so it will be a waste of everyone’s time if you approach them for your arts and craft startup.
2. Keep Track of These Suitable Investors
You need to make up a database that lists each possible investor and do your research on them. Find out if they fund companies like yours. Note down those with whom you’ve communicated. Make notes regarding what you’ve discussed through calls and conversations.
A status database like this helps you to organize your possible sources of funding so that you’re always aware of where you stand with each of them. You’ll know who to follow up with, and you’ll be aware if you need to send info for someone.
3. Leverage Your Network
Once you know people among the investors, try to have them introduce you to more fusible funders for your business. It’s always a better idea when you’re introduced to an investor by mutual acquaintances. Better if you have mutual friends.
Your network may be bigger than you realize. You’ve most likely met people in school, so you can use alumni groups to reconnect. Your network includes family and friends, along with the people you’ve worked with through the years. They may have contacts in the financial community, and you may get your introductions through them.
4. Prepare Your Pitch
When introductions are made to new potential investors, it doesn’t help your case if you’re unprepared. You have to be able to communicate what it is about your business that makes it worthwhile for investors.
You should also have a readymade email to send to serve as your pitch to potential investors. Make sure your pitch is memorable and concise.
5. Be Ready for Rejection
When you’re trying to raise money, don’t be surprised when they say “no”. In fact, it will probably be the response to the vast majority of your pitches. Out of a hundred pitches, more than 90 will say “no” and the rest will probably say “maybe”. If you’re lucky, the maybe can become “yes.
Of course, when you’re passionate about your new business it can be extremely frustrating when potential investors don’t see the possibilities of your success. But don’t be discouraged, and take the rejections as a matter of course. You just need to keep trying anyway.
6. Learn from the Rejections
You can still benefit from each meeting with a potential investor, even if they do say “no”. Perhaps they will tell you why they said “no”, so you can tweak your pitches for the next time. At the very least, you’ve met someone new that you can incorporate into your network. They may not fund your startup, but they may introduce you to people who will.
Just understand that obtaining funding isn’t a simple and easy process. It can take many months, and it will entail numerous meetings that often don’t pan out. Persevere, and once you’re able to get funding once the succeeding tries can become easier as you learn your way around.
Check out these 20 Steps You Need to Take to Get Your Startup Off the Ground