Many successful startups focusing on scaling their businesses will come to the realization that they can experience rapid growth when there’s solid capital rolling in. Extra capital allows businesses to expand, improve their brand identity, increase inventory, and much more. But where exactly does this capital come from? The simple answer is from investors who are looking to contribute and grow a profit from an early stage company’s hard work and dedication to growing a business.
So, how does a startup navigate the process of finding and solidifying the right capital investors? Here are five tips to help you get the ball rolling:
1. Expand Your Network
One of the best ways to break into the investment game and practice your sales pitch is to get yourself in front of the right people. Angel investors are a great place to start. Many of these individuals have achieved great success at major corporations and can often provide funds as well as excellent advice and resources for a startup. You can find these types of investors at conferences and seminars all across the country. It takes effort, but if you network with the right people, you’ll increase the likelihood of gaining access to these high-impact entrepreneurs who can provide the financial support and the value you are seeking.
2. Speak the Language
Surrounding yourself with high-level entrepreneurs won’t do you any good if you don’t understand the terminology and lingo they are using. Spend time reading and researching key terms like cap table, conversion rate, burn rate, real valuation, preferred stock, and educate yourself on how a venture deal works. If they don’t trust that you know what you are talking about, chances are they won’t want to invest in you or your business.
3. Aim for Personal Recommendations
Successful investors get funding requests from everywhere, and business plans coming in from cold calls are usually headed in one direction, the garbage. After expanding your network and educating yourself, work to identify investors who are realistic opportunities. After you have identified the people you want to pitch to search your contacts, and look for opportunities to network within their circles. A referral meeting will take you much further than a cold interaction.
4. Your Team Matters
Most investors believe that the quality of the team is just as important as the idea itself, if not more so! They want to see that the people behind the product are dedicated, driven, and can work well together. So, take the time to create a team with a variety of talents, showcase your depth, and emphasize your level of commitment to the idea.
5. Play the Game
Fundraising can be an exciting process if you remain malleable, and find ways to capitalize on every opportunity. In some situations failure is inevitable, but it is also necessary in order to achieve success. Entrepreneurs that play the investment game well are constantly revising their pitch, improving their idea, finding ways to close a deal, and are always keeping themselves on the move looking for the next great opportunity.
As you can see, the most successful way to gain capital investments for your startup has to do with building relationships first and the money later. Focusing on the people and connections will help you find the right type of investors for your startup, and will likely continue to open doors in the future as your business continues to scale.