Recent data for 2022 has shown that investing hit a rough patch in 2022, as the downturn in the economy and weakening equity markets rippled through the start-up world. Much of this activity involved the infusion of capital into small startup operations. It is no secret that a successful startup generally requires capital. Those seeking potential investors know that raising funds can be difficult and time-consuming.
A recent article in Entrepreneur outlined some facts for those looking to attract investors. They estimate that those who present an idea to investors have about a 10% chance for success. This means that for every business idea that raised money, there were nine that failed.
What is the formula for delivering a successful pitch to investors? Many critical factors determine success-most are centered on preparation. When pitching your ideas, you must carefully develop your strategy and complete the groundwork.
Identifying Potential Investors
What are your options to raise funds? You may consider friends, family, venture capitalists, and others. Consider inquiring among those within your professional and/or social networks. Begin to create a list of those people or organizations that may have an interest.
A venture capitalist (VC) is a private investor that generally is seeking to exchange capital for some equity. They tend to favor investing in opportunities with a potentially large return. They may ask for a lot in return for their capital due to the risk involved.
VCs may be a source of significant amounts of funds in comparison to banks. Depending on the rate of interest, these loans may take a long time to repay. VCs are likely to want some degree of control over the operations of the business. The borrower and investor may potentially experience conflict as a result of this input or control.
An angel investor is also referred to as a “seed investor” or “angel funder.” This is typically a private investor with significant financial resources. They are often found among friends or family. They often exchange capital for ownership equity in the business.
Angel investors may be a source of a single investment for a startup or provide continuous support in early stages. Unlike banks, they may be willing to fund a business that is not yet profitable.
Making a Pitch
A busy investor may only give you a few minutes to hear your strategy. For this reason, you should have an “elevator pitch” prepared. This means you must summarize your product or service very efficiently. Be sure to show that you appreciate and understand that their time is valuable.
You may want to use some sort of visual aid to outline or provide an overview. One strategy to consider is transforming your pitch into a story. Data has shown that listeners tend to become more engaged this way, as opposed to presenting spreadsheets filled with financial data.
When you have limited time, be prepared to present your key points clearly and succinctly. Always emphasize what makes your products or services unique. You should identify your target market, such as customer demographics.
The term “pitch deck” refers to a presentation compiled for an audience of a potential angel or venture capital investor. It is commonly created using PowerPoint or a similar program that contains roughly 15 to 20 slides. The content is generally not “wordy.” It is an overview that showcases your product, business plan, and business model.
- Explain how your business will generate revenue and will show profitability
- In today’s business environment, most investors will expect that you have a solid digital marketing plan
- It is important to leave comfort zones and demonstrate enthusiasm, as well as a genuine passion for your business
- Your appearance should be sharp and professional
- Investors often find patents, trademarks, and other forms of intellectual property to be appealing
- Have a financial projection that outlines revenue and expenses
- Your financial projections should be realistic and have benchmarks
- It is important to demonstrate a solid understanding of your market and competitors
- Emphasis should be placed on competitive advantages that you have
- Your pitch should contain the amount of capital you are seeking and equity offered
Your Team and Leadership
In many cases, solo entrepreneurs may be less appealing to potential investors. Many investors are more attracted to those that have formed a team and shown leadership skills. You also may want to discuss your experience in this or a similar industry.
Handling Questions and Potential Objections
An interested investor is likely to pose questions. You should be well-prepared to address questions that you are likely to be asked. Your ability to respond confidently and naturally is very important.
A potential investor may identify possible weaknesses in your strategy or model. You should be prepared to address these concerns in a way that is clear and skillful. If a potential investor objects, it should be considered as an opportunity to demonstrate your knowledge and understanding.
You should be prepared to discuss an exit strategy. The investor may want to know what the value of the business could be in five years. You may want to proactively discuss options such as an IPO or acquisition.
After making a pitch, you should consider maintaining contact. You may compose an email to follow up. This may briefly summarize some of the main points you discussed. Look for opportunities to stay in touch and further develop a relationship.
Why Consider RevTek Capital as a Funding Source
RevTek Capital offers funding solutions for startups and small businesses in various technology markets. Our model is designed to provide the capital funding needed without requiring any exchange of equity or control. Your business doesn’t need to be currently profitable. What is required is a steady source of recurring revenue.
Once the capital is provided, it is paid back in reasonable monthly payments. We have no interest in obtaining equity or control of your business operations. We recognize that you should have the freedom to execute your business plan. We understand that many funding options are confusing and time-consuming. Furthermore, we strive to get you the capital you need in a way that is simple and quick. Those seeking to grow their business are encouraged to contact us today at (602) 730-4558 to reach our team of professionals.