<img height="1" width="1" style="display:none;" alt="" src="https://dc.ads.linkedin.com/collect/?pid=32851&amp;fmt=gif">

FOOD FOR THOUGHT

4 tips on how to secure investors for your business

Posted by Aaron Wallace on January 31, 2017

Approaching potential business investors can be a daunting experience, especially if it’s your first time trying to raise capital. Below we share some tips to help you network with confidence and find the right investors for your business.

how-to-secure-investors-for-your-business.jpg

1. Get your business ‘investor ready’

Before you approach investors you need to make sure your business is ‘investor ready’. Are your finances in good shape? Are you meeting all of your tax obligations? Do you have efficient business processes in place? Does your business look good on paper?


Potential investors are going to put your business under the microscope. Do your best to prepare for this rigorous screening process by making sure everything (and everyone) is performing to a high standard. This may take a few weeks, a few months, or even a few years, depending on where you are at in your business journey.


2. Practice your equity sales pitch

Do you know your equity sales pitch back to front? You should create a sales speech and practice this regularly; you never know when you might meet a potential investor, and you can’t afford to choke under pressure. Preparation is key.


Try to strike a balance between being salesy and informative. Investors won’t be wowed by your optimism or confidence as much as they will be wowed by your business knowledge. Make sure you cover all the things that investors want to hear, such as your sustainable competitive advantage and long-term vision.


3. Be clear about how much funding you need

One important tip on how to secure investors for your business is to work with an accountant or financial advisor to determine exactly how much equity you need to achieve your goals. You don’t want to raise money and realise three years down the track that you need more – this could upset equity holders because it unexpectedly dilutes their equity shares. You should be fully aware of your future needs so you can inform initial investors of plans for additional tranches.


It’s also worth noting that the more money you require, the harder it may be to get; it’s easier to raise $2 million than $10 million. Crowdfunding platforms have a limit of $2m, so as soon as you go over this figure you will be marketing to a smaller group of investors. As with the housing market, you’ll have a larger pool of potential buyers for a $1.5m house than you would for a $5m house, because there are simply more strategies available for raising funds. Once you go over $2m, your options tend to be limited to private equity firms or an IPO. That said, the effort required to get a larger amount is typical worthwhile.


4. Aim to attract a cornerstone investor

The first investor is the hardest. Securing a cornerstone investor builds confidence and shows that you’re not the only one who believes in the business. It’s like a snowball effect; once people see others joining, they will see the value and think it must be a good deal. As soon as you have one or two people on board, you should have the power of momentum on your side and be able to attract new investors with greater ease. 

 

 

For more information on raising capital for your business please download our guide:

 

 Preparing to Raise Capital - A guide for New Zealand SMEs

Topics: Raising Capital