Startup fundraising is a difficult process, but it’s also one that can lead to exponential growth for your business. So if you’re thinking about raising funding from startup investors, here are some tips on how to get started.
Talk to investors.
One of the best ways to get funding is through investors. If you’re a small business, it can be difficult to get started with an investor, but it’s not impossible. To attract investment capital, you’ll need to be able to show that your company has a good product and that there is potential for growth.
There are different types of investors out there, but generally speaking, they all want the same things: a promising startup idea coupled with an experienced team who can execute it successfully over time.
Make the right connections.
Once you’re ready to start networking, it’s important to find the right fit. This could mean connecting with people who are in the same industry as you and can give advice on how to grow your business.
It might also mean finding someone that can invest in your company or connect you with other investors. You should always be looking for those connections, no matter where they are located – whether it’s in another city, another state, or across the world!
Connect with other startups and their founders online via social media platforms such as LinkedIn or Twitter. A lot of founders are open about what they’re working on so if yours isn’t listed yet go ahead and reach out either by sending them an email (make sure it gets read!) or Tweeting at them directly using #wearehiring.
Connect with someone whom you know in common.
The most common way to get in touch with an investor is through a shared connection. If you know someone in common, there’s a good chance he or she will introduce you to the potential investor. This doesn’t work for every startup, but it is a great way to start and can lead you down the path of getting investment from someone else who knows this person.
To find people who might be interested in investing in your company, build up your network and keep an eye out for anyone who mentions they have experience investing (or even just talks casually about investing). Then reach out directly or ask someone who knows him/her well to make an introduction on your behalf.
Research what they are investing in.
Investors are usually very open about what they have invested in, and it’s perfectly acceptable to look at an investor’s portfolio before contacting them. You can find their website and check out their investments there. Take note of any similarities between your business and theirs, or any differences that might be relevant to your product or service.
Find out their investment philosophy.
You should also find out what role they play in the company’s decision-making process. If you’re talking to a venture capitalist, they may be responsible for only one or two investments. On the other hand, if it’s an angel investor or private equity fund that you’re speaking with, they might be taking part in dozens of investments at once.
Researching their investment philosophy will help you determine if they are a good fit for your company and whether or not your goals align with theirs. It’s better to find out these things before asking them for funding than after investing time and money into developing a relationship with them—and then having them tell you that what you’ve developed doesn’t meet their criteria!
Be timely and relevant.
Timely: Be the first to pitch before the competition. Do not wait until you are close to launching, or else there will be no room for negotiation on terms. If you are too early and do not have a product yet, investors may be wary of investing in your idea because it does not exist as anything more than an idea at that point in time.
Investors want a tangible product or service that can show them progress toward profitability so as to minimize their risk potential when investing in a company. If you do not have something concrete yet but believe strongly enough in your idea for it to succeed, then consider asking for an introduction from someone who could potentially help get your startup off the ground (such as someone from another startup who might know other investors).
Relevant: Make sure all of your material is tailored specifically toward each investor’s interest and needs before sending out emails/pitches—this way, they will understand exactly what kind of value they’re getting out of investing with you right away!
Don’t send generic pitches unless there’s nothing specific about your company that would appeal specifically instead; otherwise, it’ll just look like spamming which won’t help anyone involved whatsoever!
Be thoughtful about your approach to startup investors.
When you reach out to an investor, be sure to follow these guidelines:
Don’t be pushy. As a founder, you’re going to have strong opinions about your company and the direction it’s headed in—that’s understandable. But investors are not looking for someone who is overly assertive or aggressive with their pitch.
Show them respect by giving them the time they need to make up their minds about investing, whether it’s three months or a year later. If they ask for more information or want to talk again at some point in the future, don’t take this as a sign that they’re interested; instead, try reaching out every few months just so that they know you haven’t forgotten about them (and vice versa).
Don’t be too informal. While it’s important not to come across as overly serious when talking with investors (“You know what I mean?”, “Right?”), it’s equally important not to come across as too casual (i.e., using slang).
It can feel difficult knowing how formal/informal your language should be when speaking with potential early-stage investors but remember that even though they might not always seem like it, most people still appreciate formality in general business interactions (even if those interactions are via email)!
Conclusion
In the end, your approach to investors is just as important as the information you provide them. Keep in mind that they are busy people and need to be able to quickly determine whether your startup is a good fit for their portfolio.
As we’ve seen, investors have many criteria that they consider when deciding which companies to invest in.
You can learn more about these criteria from our article on how startups get funded by angel investors or VCs.
It’s also helpful if you have someone who knows an investor personally introduce you or connect with them through social media channels like LinkedIn so that they know what type of company or entrepreneur they’re working with before meeting face-to-face.