Wednesday, October 9, 2024
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How To Convince Investors To Invest In Your Business

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Starting and growing a business often requires third-party funding. One option is to take out a loan to cover costs – but this requires having a good credit score and taking on debt. Asking investors for funding can be a preferable option for many business owners. This instead requires paying shares of your returns in exchange for funding.

Of course, the hardest part of seeking out funding from investors is convincing them that your business is worth investing in. VC firms and angel investors are likely to have lots of different business owners approaching them for funding. You need to stand out from the crowd and show investors why they’re better off putting their money into your business.

Below are just a few tips that can help you to win over investors.

Know your investor

When pitching to different investors, it’s important that your pitch is personalised to each one. This is because every investor is likely to have different interests, different knowledge and different experience that could influence what they invest in.

An investor who is already passionate and knowledgeable about your product won’t need as much educating. However, you may need to be prepared to delve further into the specifics of your business and will need to push your USP so that your company stands out. If the person you’re pitching to has previously invested in similar businesses or had hands-on experience in your industry, don’t be afraid to bring this up in your pitch to show you’ve done your research. Avoid pitching to investors who have invested in similar businesses that have failed as they may automatically see your business as another bad decision. 

Pitching to an investor who has no knowledge or interest in your business is more of a gamble, however you may still be able to win them over. You will need to spend more of your pitch educating them about how your business works and why it is unique. Just make sure to speak in layman’s terms and convey it in as exciting and snappy a way as you can – you don’t want to confuse or bore them. 

Tell a story

Telling a story is one of the most reliable marketing strategies – whether you’re trying to win over investors or customers. People are naturally engaged by a good story. When pitching to investors, this could be a) the story of how you came up with your business or b) the story of a customer who’s life was changed by your business. 

As with any good story, there needs to be a struggle that is overcome half-way through. This is a great time to be honest about mistakes you have made and how you overcame them. Owning up about mistakes shows honesty, while overcoming them shows that you are a persevering problem solver. 

Try to keep your story as short as you can while making it emotionally compelling. Make sure to choose an angle that each investor can relate to (if you have overcome illness or an injury and so has an investor, don’t be afraid to bring this up within your story – so long as it’s relevant to your story).

Make the value of your product clear 

At the end of your story, you need to clearly show why your product is valuable. How has it helped solve a problem? And is there a clear demand for it?

This is a great place in your pitch to quote third-party stats that support a need for your business, positive survey/focus group results that you have personally collected or positive customer reviews that you have received. All of this can help build up a picture that your business fulfils a need.

Of course, if you’ve had good sales or profits, this is also going to win over investors by showing that your business already has the potential to be successful. This leads onto the next important tip…

Get your figures right

Figures are important when pitching to investors. It’s a good idea to bring documents that show how your figures have been calculated. These could be supported by graphs that make information easier to read. 

What types of figures do investors want to see? A few key figures include your net profit, sales, margins and cash flow. It’s also a good idea to include information about any debts you have in your financial report (but you probably shouldn’t highlight them in a pitch). Make sure to include figure projections if you’re getting funding for a business that you haven’t even started yet or you’re planning to grow an existing business. 

Be prepared for questions surrounding your figures. Memorising all your figures could help you to come across as trustworthy and confident. If you don’t think you can memorise these figures, make sure to bring documents or notes that you can quickly read from. 

Avoid Death by PowerPoint

PowerPoint presentations can be useful for conveying all kinds of visual information about your business such as graphs, product diagrams, videos, stats and images. However, you need to be careful of adding too many slides or too much information per slide. 

Experts recommend less than 12 slides and no more than 30 words per slide. This can stop a presentation from being too overwhelming or tedious (often known as ‘death by PowerPoint’). Make sure that your presentation looks professional and unique. It could be worth showing it to family or friends to see what they think. You may even want to hire a PowerPoint agency to help design your slides so that they look as professional and unique as possible. This will show investors that you’re serious about getting funding. 

Be a good listener

Pitching to investors may seem like it’s all about talking. But listening can also be a valuable skill when trying to win over your investors. Once you’ve delivered your pitch, an investor will typically have questions to ask. It’s important that you pay attention to these questions so that you answer them accurately. It’s also important to consider the types of questions they are asking and the tone they are using to understand their true intentions. 

Are their questions all pointing towards a certain concern that they are waiting for you to address? Do they seem enthusiastic when asking questions? Or do they seem disinterested or annoyed? By reading deeping into their wording and tone, you can figure out the best way to answer questions to win over investors. You can also ask questions back if you want to check if an investor has understood everything or think they may have some other concerns.

Allow some leeway for negotiation

Some business owners can fail to land an investment deal at the last moment simply by leaving no room for negotiation. Of course, this doesn’t mean that you should be willing to give away huge shares of your business that will prevent you from ever making a decent profit. However, you do need to realise that investors are trying to get the best deal they can too and being able to compromise a little could help you win over investors who may have limitations as to who much they’re willing to invest.

There is no rule as to how much room you should leave to negotiate. Just make sure that you go into a pitch with the possibility of negotiation on the table. Some investors may be renowned for always negotiating things on their terms, while others may be more willing to invest in whatever you offer upfront. 

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