February 16, 2015 at 12:40How to attract startup investment. Part 2
- Transfer
This is the second part of the conversation that we started here .
Learn how to develop a project with minimal investment.
You will look advantageously in the eyes of investors if you have a plan for the development of the project without additional investments. Even better, if you really can implement this plan.
In this case, you will be sure that you will succeed. And, therefore, the investor will have more confidence and loyalty towards you.
Only you can decide for yourself who to be: a startup who brought his project to a critical point, waiting for manna from heaven, or an adequate businessman who lives within his means, but is developing steadily. This does not mean that the latter does not need additional money. In this case, the money will only accelerate the development process, and not just reanimate the project.
Of course, there are exceptions - projects that cannot be developed in a short time and without large investments. But you better not be such an exception.
Know how to stop in time
School and university are long over. Working for good grades doesn't make much sense now. You should not try to attract as much money as possible just because a lot of money is a good assessment of your work with investors. Do not try to be better than someone in attracting investment. This is not a competition. Take as much as you need and stop.
The next time you need money, you will raise rates and look for larger investors. Do not fall into the illusion that the invested efforts to attract the largest possible amount will certainly be justified and have a positive impact on your business. Everything has its time.
Beware of investors who are trying to bargain.
There are situations when an investor tries to bring down your price. The amount you want does not suit him, and he seems to be trying to convince you that he knows best how much you need. Such arguments as “other investors will not pay you more”, “your requests do not correspond to market prices” are used.
Of course, if you have very little experience, then it is worth checking such information. But in other cases, it is better to stop communicating with them as soon as possible. Do not waste time in vain.
Choose the best option now. The future is unpredictable.
Probably, it happens that you hesitate, hope that a better option is about to appear. Someday. And when do you need the result of investing in your startup? Ever too? Do not try to predict the future, otherwise you may miss what is in the present.
This statement, quite abstract at first glance, directly relates to the topic of startup development. Firstly, it is advisable for you to get the result yesterday so that the project does not stop in its development. Secondly, the fundraising regime inevitably comes to an end and the regime of direct work on the project, which was mentioned in the first part of the article, begins .
If you pull with the answer, investors can get away from you. On the other hand, if you are required to make a decision immediately, do not let yourself be pressured. In a hurry, you may not take into account some “insignificant” details, which can later come to your side. Therefore, if you don’t have time left and you need to make a choice between several proposals of investors, then it is optimal to give yourself a three-day working period for consideration.
Rule 25%
At the initial stage of startup development, under a successful set of circumstances, there is a temptation to sell a significant part of the company to immediately improve the financial well-being of the project. If you, for example, sold 40% of your company and continue to raise capital, then investors may have doubts about your account.
Are you really interested in the active development of the company? Or are you even trying to sell it? You run the risk of being misunderstood. Therefore, a common practice at the initial stage is the sale of not more than 25% of the shares of your company.
Let anyone be involved in attracting investment
If your company has several co-founders, then you should entrust one of them with the search for investors. Then the rest will be able to focus on direct work on the project.
Of course, all partners should have enough trust and mutual understanding. Situations, of course, are different, but this requirement, in principle, plays a key role in the life of the company.
The partner who negotiates with investors on behalf of the company is usually its executive director. In any case, he must have the highest authority in the project, even if this person is not a manager or marketer.
Of course, at the last stage of negotiations, all the co-founders can participate. Especially when it comes to large investments.
Prepare a quotation and presentation
In general, this is not advice, but just another reminder that this is important. These materials will judge your company, so they should be of high quality. A commercial proposal and presentation should accurately and concisely answer the most important questions for the investor:
• Why is this a good idea?
• What have you already achieved?
• What do you plan to do next?
Sometimes investors are asked to send them a presentation of your project. Please don’t say that you didn’t have time to do it.
But more often, practice shows that a request to send a presentation instead of making an appointment indicates a weak investor interest.
Stay human
Some investors often wear a mask of arrogance or even indifference. They probably think that in business there is no place for feelings. But, on the other hand, if you meet in person, then the human factor comes into play. And here it is up to you to decide whether to use it to your advantage or to become the same “business machine”.
Whoever says anything, a personal contact takes place between you and the investor's representative. You are discussing the conditions, there may be disagreements and misunderstandings, which, obviously, is not beneficial to anyone. Therefore, be diplomatic, develop skills to work with objections, and just be open.
And then, it is likely that the opposite side will begin to behave differently.
There is nothing supernatural in this advice, but for some reason it is often not taken seriously.
What if tips do not work?
Of course, there can be many reasons. There are no definite answers here. Several suggestions can be made. But first answer the question: do you work enough?
If your project has not yet interested anyone, then it is better to switch to its active development.
The general market situation may be unfavorable for you.
Perhaps you should work on your self-presentation skills, persuasion skills.
Perhaps you were just late, and the investment went into other projects.
In any case, there should be an opportunity to wait and try again with renewed vigor.
Everything is easier than it sounds
All the tips above are quite simple. It is not necessary to apply them all at once or constantly consult them. Use what suits you, what seems right to you. This is not a panacea for poverty, but no one claims it. It describes the recommendations that work for many companies that have arisen as a result of numerous trial and error.
Learn how to develop a project with minimal investment.
You will look advantageously in the eyes of investors if you have a plan for the development of the project without additional investments. Even better, if you really can implement this plan.
In this case, you will be sure that you will succeed. And, therefore, the investor will have more confidence and loyalty towards you.
Only you can decide for yourself who to be: a startup who brought his project to a critical point, waiting for manna from heaven, or an adequate businessman who lives within his means, but is developing steadily. This does not mean that the latter does not need additional money. In this case, the money will only accelerate the development process, and not just reanimate the project.
Of course, there are exceptions - projects that cannot be developed in a short time and without large investments. But you better not be such an exception.
Know how to stop in time
School and university are long over. Working for good grades doesn't make much sense now. You should not try to attract as much money as possible just because a lot of money is a good assessment of your work with investors. Do not try to be better than someone in attracting investment. This is not a competition. Take as much as you need and stop.
The next time you need money, you will raise rates and look for larger investors. Do not fall into the illusion that the invested efforts to attract the largest possible amount will certainly be justified and have a positive impact on your business. Everything has its time.
Beware of investors who are trying to bargain.
There are situations when an investor tries to bring down your price. The amount you want does not suit him, and he seems to be trying to convince you that he knows best how much you need. Such arguments as “other investors will not pay you more”, “your requests do not correspond to market prices” are used.
Of course, if you have very little experience, then it is worth checking such information. But in other cases, it is better to stop communicating with them as soon as possible. Do not waste time in vain.
Choose the best option now. The future is unpredictable.
Probably, it happens that you hesitate, hope that a better option is about to appear. Someday. And when do you need the result of investing in your startup? Ever too? Do not try to predict the future, otherwise you may miss what is in the present.
This statement, quite abstract at first glance, directly relates to the topic of startup development. Firstly, it is advisable for you to get the result yesterday so that the project does not stop in its development. Secondly, the fundraising regime inevitably comes to an end and the regime of direct work on the project, which was mentioned in the first part of the article, begins .
If you pull with the answer, investors can get away from you. On the other hand, if you are required to make a decision immediately, do not let yourself be pressured. In a hurry, you may not take into account some “insignificant” details, which can later come to your side. Therefore, if you don’t have time left and you need to make a choice between several proposals of investors, then it is optimal to give yourself a three-day working period for consideration.
Rule 25%
At the initial stage of startup development, under a successful set of circumstances, there is a temptation to sell a significant part of the company to immediately improve the financial well-being of the project. If you, for example, sold 40% of your company and continue to raise capital, then investors may have doubts about your account.
Are you really interested in the active development of the company? Or are you even trying to sell it? You run the risk of being misunderstood. Therefore, a common practice at the initial stage is the sale of not more than 25% of the shares of your company.
Let anyone be involved in attracting investment
If your company has several co-founders, then you should entrust one of them with the search for investors. Then the rest will be able to focus on direct work on the project.
Of course, all partners should have enough trust and mutual understanding. Situations, of course, are different, but this requirement, in principle, plays a key role in the life of the company.
The partner who negotiates with investors on behalf of the company is usually its executive director. In any case, he must have the highest authority in the project, even if this person is not a manager or marketer.
Of course, at the last stage of negotiations, all the co-founders can participate. Especially when it comes to large investments.
Prepare a quotation and presentation
In general, this is not advice, but just another reminder that this is important. These materials will judge your company, so they should be of high quality. A commercial proposal and presentation should accurately and concisely answer the most important questions for the investor:
• Why is this a good idea?
• What have you already achieved?
• What do you plan to do next?
Sometimes investors are asked to send them a presentation of your project. Please don’t say that you didn’t have time to do it.
But more often, practice shows that a request to send a presentation instead of making an appointment indicates a weak investor interest.
Stay human
Some investors often wear a mask of arrogance or even indifference. They probably think that in business there is no place for feelings. But, on the other hand, if you meet in person, then the human factor comes into play. And here it is up to you to decide whether to use it to your advantage or to become the same “business machine”.
Whoever says anything, a personal contact takes place between you and the investor's representative. You are discussing the conditions, there may be disagreements and misunderstandings, which, obviously, is not beneficial to anyone. Therefore, be diplomatic, develop skills to work with objections, and just be open.
And then, it is likely that the opposite side will begin to behave differently.
There is nothing supernatural in this advice, but for some reason it is often not taken seriously.
What if tips do not work?
Of course, there can be many reasons. There are no definite answers here. Several suggestions can be made. But first answer the question: do you work enough?
If your project has not yet interested anyone, then it is better to switch to its active development.
The general market situation may be unfavorable for you.
Perhaps you should work on your self-presentation skills, persuasion skills.
Perhaps you were just late, and the investment went into other projects.
In any case, there should be an opportunity to wait and try again with renewed vigor.
Everything is easier than it sounds
All the tips above are quite simple. It is not necessary to apply them all at once or constantly consult them. Use what suits you, what seems right to you. This is not a panacea for poverty, but no one claims it. It describes the recommendations that work for many companies that have arisen as a result of numerous trial and error.