Are you looking to raise capital for your startup? If so, you should always be prepared for potential investor meetings. Approaching investors unprepared is one of the top reasons entrepreneurs fail to get their small businesses off the ground.
Investors have pitch meetings with different entrepreneurs regularly. The success of your fundraising efforts will depend heavily on your business plan, strategic goals and investor-ready financials.
Here are some ways you can help your business prepare for pitch meetings.
Have a Concrete Business Plan & Business Model
If your business plan is a roadmap showing investors where your company is headed, your business model is the blueprint showing how your business will get there. Investors will rely on these essential tools to evaluate your business's feasibility and lifetime value.
Prepare a Compelling Story
Whilst numbers and discipline are essential, getting investors hooked on your vision will be the strongest tool in your early stage. Telling an emotionally compelling story is key to convincing your investors to participate in building your vision.
As much as investors invest in your business, they invest in you.
They want to see your ability as a founder to tell your company’s story and share your vision with those involved. This is crucial at an early stage because it tells of your ability to attract investors in the future or convince customers to purchase your product or service.
Know Your Market
Knowledge of your addressable market and ideal customer base are persuasive points to include in your pitch. While your idea might be great, if you haven’t researched your potential buyers and their willingness to pay for what you’re offering, you’ll never win over the hearts and wallets of investors.
Outline your target markets, market size, demographics, and growth prospects. Devoting resources to professional market research can transform your business plan.
Maintain Steady Bookkeeping
Many entrepreneurs fail to see the importance of well-maintained bookkeeping from day one. However, keeping on top of your bookkeeping is key to making data-driven decisions and understanding the business's financial position.
If you are seeking external funding or going through M&A, potential funders will want to see your books as part of their due diligence process. Preparing these financials can be time-consuming, so you should avoid getting them ready at the last minute.
Pro Tip: Consider outsourcing your books to a professional bookkeeping firm
If you are unable to manage your books accurately in-house, hiring a professional bookkeeping firm is a great way to ensure your books are up-to-date and reliable. They can also help you prepare cash flow projections and other financial reports that investors might want to see.
Prepare Realistic Financial Projections
While you’ll want to impress investors with your ability for growth, your projections should reflect a realistic picture of your company’s capabilities. You’ll also want to include a clear idea of the valuation of the business, the equity available and a potential exit strategy.
Pro Tip: Make sure your financial calculations are accurate!
This may seem obvious, but you’d be surprised by how many investors find inaccurate financial calculations. If you do not have a strong financial background, consider hiring a fractional controller to review your financial projections and provide visibility on financial calculations such as your burn rate, customer acquisition cost, and business runway.
Be Ready For Questions
When preparing your pitch, consider your audience and who you are selling your idea to. Are you pitching to an angel investor, a venture capitalist firm, or a bank? Your pitches should always be tailored to the audience.
During your pitch, you should also be prepared to answer questions regarding using funds, your current financials, and your exit goal. Answering these forward-thinking questions will reflect your confidence in the business and ability to plan for it.
On top of testing your numbers, your character will also be up for the test. Raising capital is almost like a job interview where you’ll constantly be required to prove yourself.
Always remember that while you’re pitching to emphasize the value of your business or idea, it is also important to be honest with the investor. Mutual trust is the key to building a long-term relationship with your investor.
Start your Preparation Early
Fundraising can be intimidating, but sufficient preparation earlier on can help ease the process. The first step to preparing for a pitch is to have an accurate set of books.
How to find the right investor in Six steps
Step 1. Get clear on your needs.
Before finding the most promising startup investor, you’ll need to get clear on your investment relationship goals.
- What kind of expertise or connections are important to your business?
- How involved or hands-on do you want your investor to be?
- What level of funder reporting or communication are you ready to commit to?
- How much (if any) equity is your business willing to give up?
Knowing your business needs in advance will help you save valuable time by pre-empting unproductive finance avenues.
Step 2: Explore all fundraising options.
Although fundraising opportunities vary widely, many business owners chase the wrong investor option for their needs.
When startup founders think about fundraising, they think about equity investors like venture capitalists (VCs) or angel investors. Although these options can offer money, expertise, and connections, giving up a piece of your company isn’t always necessary or ideal for raising money.
Debt financing, government grants, and business accelerator programs are all worth exploring as an alternative to seeking VC money.
Step 3. Leverage your networks.
If you’re unsure how to find the right investor, leveraging your personal and professional networks is a good place to start.
By reaching out to business partners, former colleagues—even friends and family—you can make your fundraising efforts known and ask to be introduced or recommended to backers who may be a good fit.
Not only will this help you cut through the usual flurry of investment queries (venture capital firms, for example, receive more than 1,000 proposals a year), but you’ll also stand out as being endorsed by a trustworthy source.
Step 4. Find other ways to connect.
Reaching out through a professional social media site like LinkedIn can be a great way to connect with a list of potential investors—and get advice on what they typically look for in the startups they fund.
Once you’re connected, you can inquire about:
- Setting up a call
- Meeting over coffee or drinks
- Emailing them updates about your business
Other connection possibilities include adding your startup to investor-friendly sites like AngelList, speaking at business conferences, and leveraging accelerator or incubator program contacts.
Step 5. Qualify prospective investors in advance.
As you consider finding the right investor, don’t forget that doing your due diligence—by pre-qualifying potential funders—is the best way to identify mutually beneficial opportunities.
- Does a particular investor fit your needs?
- Does your business fit their criteria? (Think in terms of your company stage, location, or industry, for example)
- Can they provide you with the amount of funding you're looking for?
You may also want to investigate a backer’s reputation, interests, and who they’ve funded in the past by researching their website or a public database like Crunchbase.
Steps 6. Engage multiple investors simultaneously.
To get better acquainted, don’t be afraid to engage in conversation with as many as 6 potential backers at once by:
- Listing and contacting your top half-dozen choices
- Getting investor-ready so you can effectively pitch your business when you meet up
- Crossing off and replacing non-starters on your list with next-best options
Eventually, you’ll narrow your company’s best-fit funding opportunities to one or two prime investor relationships.
Final thoughts …
Some startups are fortunate enough to raise funds with minimal outreach. In most cases, however, you’ll need to connect with dozens of potential backers to find the right investor for your business—most of whom will want to see financial statements and sales and revenue projections.
We have a wealth of experience guiding tech startups and entrepreneurs through setting up accurate, investor-ready bookkeeping systems. Contact us today to learn how we can help you manage your books so that you’ll always be ready to talk to investors.
