Here’s something to keep in mind as you set out in your search of funding for your startup.
"Business opportunities are like buses, there’s always another one coming."
This sobering reminder comes from Richard Branson, founder of Virgin Enterprises, a great entrepreneur with over 360 business ventures under his control.
His insight and attitude are shared by the majority of today’s investors. Given how tight the world’s credit markets are right now, the tremendous challenge of funding a startup has become trickier than ever before. There is no doubt about it—you’re selling your idea in a buyer’s market and it is a tough sale.
Investors are cherry picking the best deals and they’re taking their sweet time doing it. This is what you’re up against. But, with the right know-how and a good strategy, you can still make your startup a reality. Let’s show you how.
Make your project jump out at them
We have already discussed how to put together a funding package that will get potential investors excited about your project. As a startup, you can do a few extra things to make your project stand head and shoulders above the rest.
Investors are looking for evidence that your venture is sound, viable and profitable. You have to show them that the merits of your project heavily outweigh its risks. Remember the keyword here is “show”, not “tell”.
Here’s what you can do to grab their interest:
• Present a SWOT Analysis of your project
Such a critical analysis of your project and how you plan on carrying it out it will enhance your image to no end. It boosts investors’ confidence in your commitment to the success of your project. Here’s what this involves:
Strengths - Just waxing lyrical won’t do. Share facts and provide proof. Discuss them in detail and express how you plan to improve upon them. A great way to accomplish this is to have a reputable third-party firm perform a feasibility study of your project. This isn’t always inexpensive but it is absolutely money well spent.
Weaknesses - Each project has weaknesses. List out definite plans on how you can shore them up. Knowing your deficiencies and thinking about how to counter them is something investors welcome. On the other hand, claiming that your project has no significant weaknesses will send them running in the opposite direction.
Opportunities - Explain what opportunities there are and how you plan to exploit them. You could highlight gaps in the market that you could fill, the shortcomings of your key competitors or a scope for future expansion. Your opportunities could arise out of changes taking place in the social, economic, technological and political environment. Changes in government policy could also open up new vistas for your project.
Threats - You hope for the best, but, show them that you’re prepared for the worst. List and analyze potential threats to your project’s success. Then, make sure you have a Plan A, B, C, D and E. Investors’ confidence in you and your venture will soar if you can identify potential threats and show them how you plan on countering them.
• Address investor concerns – This cannot be understated.
An investor’s biggest fear is loosing their shirt on a bad investment. Because of this, they’ll be looking for all of the holes in your project and the assumptions you’ve made.
You need to know this and be one step ahead with a sensible solution for each issue they raise. If you don’t address their concerns and quell their fears, they’ll move on to another of the hundreds of projects or so that are also vying for their money.
• Be direct and honest – Be prepared.
Investors will express their concerns about your project idea, you, your abilities and the market for your project. You have to be direct and honest with your responses. Seasoned investors can easily tell if you’re trying to bluff them. Do not be afraid to admit what you do not know or need to look into things further.
• Don’t take criticisms personally - This is, perhaps, the most valuable piece of advice we can give our clients. The last thing you want to do is feel offended by an investor’s critical analysis of your venture. They are not out to kill your dream. They just want to make sure they’re making a sound business decision and so should you.
Keep an open mind and listen very carefully to what they tell you. Their perspective can provide great insights into weak points that have been overlooked or underestimated.
• Welcome input and advice – Believe it or not, investors who are interested in your project will be more than happy to give you their honest advice!
Remember, you’ll be talking to accomplished individuals who have made a lot of money investing in other businesses. Ask for their input! They will like this approach because it shows that you are looking to build strong and profitable relationships.
More pointers that will help you get investor attention
• Investors are looking for value added projects with opportunistic returns, not high risk, pie-in-the-sky pipe dreams. Of course, if you have put together a great project package that includes a solid business plan and feasibility studies that back up your facts, you do not need to worry.
Be wary of sounding vague, unsure or unprepared. That would be suicide!
• Awarded contracts. Times have changed. It is not enough anymore to show that you have contracts from clients. If the success of your project depends on those contracts, you will need to prove to investors that you have something real. Show them that your contracts are trustworthy by demonstrating that funds have already been allocated and approved.
This is especially critical with US government contracts. The consensus is that the US government is broke. The Obama administration has been squeezing their suppliers hard and forcing them to extend 120 day credits on their contracts. This has affected the profitability of many companies and investors have been burnt because of it. You can be sure that if you have obtained government contracts, investors will be skeptical of them.
• Investors are looking for unique ventures. If you are offering a "me too" service or product, you will have to work extra hard to convince investors that you have an effective plan to gain market share.
If you cannot convince them of this they will simply walk away. They know that the competition will not welcome your entry into their market and that they’ll do everything they can to massacre you. The only way you will be successful is if your value proposition is unique enough to seize your market’s attention.
• Focus on building strong, long-term relationships. The success of your venture depends on building strong, lasting relationships with the right investors. Your goal has to be to do exactly that.
Be honest, direct, sincere, transparent and passionate. It helps to be a little crazy too. After all, you need to be if you’re to have any hope of succeeding against today’s odds.
For guidance and support
As global capital solution experts, we at Lauton Funding, understand the unique challenges our startup clients face in their quest for funding in today’s tight market. That is why we we’re committed to working long and hard until our clients successfully raise the capital they need to make their ventures a reality. We stand ready to service all of your funding needs. We’re just a phone call or email away.
