You have a startup that is already running well and generating revenue. But to take the next step in your growth, you need external funding. With you, there are many more companies knocking on investors' doors, so it's important to make sure you stand out. Therefore, in this article we list the things you need to have in place so that an investor is more likely to invest in your business.
Not every investor is the same
Before we begin, it is important to point out that not every investor values exactly the same things. Some may base their decision primarily on facts, while others may put more weight on the personal click with you and your team. Also, for example, not every investor takes the same amount of risk. There are some things that almost every investor pays attention to. Have you got those things right? Then your business plan is probably investor ready, and you can start looking for investors.
A dedicated team
It is common for entrepreneurs to already run a business and want to do a startup alongside it. This is neither right nor wrong, as long as an entrepreneur can devote enough time to his startup. Only then is there commitment and execution power. Or the entrepreneur has found someone willing to pull the cart and go full steam ahead. Funders want to see that you and your team are doing everything possible to make the startup a success. Finally, it's also about your team showing passion and drive, although you can't really show that until you're already at the table with an investor.
More than an idea
Of course you think your company is that golden needle in the haystack, just like any proud parent. Yet chances are that an investor has seen a similar idea come along before. That's just how it works: if there's a problem, there will always be more people who want to solve that problem. Just make sure your good idea is backed by enough evidence that it will work in the real world. Which brings us to the next point.
You've probably already thought about product-market fit: does your product fit the market you have in mind? But even more important is whether your product or service solves a problem that needs to be solved. Investors like to see that question answered because the chances of success are greater if you solve a real problem. Therefore, you interview potential customers about the problem they face, how often they face that problem and how they solve it so far. You delve into alternatives used, what's wrong with those alternatives and how and where your clients have looked for alternatives. Is that clear? Only then do you look at product-market fit.
An open goal shot, but if your startup has already collected launching customers or letters of intent, you have an edge with many investors. There is almost no better proof that your product or service works.
Are there no launching customers or letters of intent yet? Then start looking for your early vangelists, such as companies willing to buy your product before it is fully ready for the market. Sometimes they are also willing to invest in the further development of your product. Do you have a clear idea of the problem you are solving for this group?
Whatever variant applies to you, what matters is market validation: can you show that there are people who (want to) buy your product or service.
Earnings in the chain
Chances are you work with a number of supply chain partners to get your product or service to market. Have you thought about how those parties can benefit from your success? If there is a future for more parties in your startup, the chances of success are greater. And that's what investors like to see.
As an entrepreneur, it is critical that you provide timely and accurate information to financiers. While not every funder has the same needs, understanding your business plan and financial figures is always important. Be proactive and careful about this. The more you show that you have thought about the details, the more confidence that will give. In doing so, work out different scenarios: you will not only know what needs to be done to scale up, but also what you can do if things go wrong unexpectedly.
No one is perfect. The better you know about yourself and your business what the pitfalls are, the easier it becomes to steer around them. That's why it's smart to invest in mentoring. This will give you experience, expertise you lack yourself, and access to interesting networks. This can be on a personal level, but also company-wide in the form of an Advisory Board, for example. The importance of mentoring cannot be underestimated when your startup fails or shines.
Differentiation is key. And if you can patent or otherwise protect a product or service, then you really have something unique in your hands. That makes you even more interesting to investors. These days there are all kinds of ways to protect your plans .
If you have these 8 things together, then you are well on your way to attracting investors. Do you still need support in making your business plan investor-ready? Knock on Flinc's door and we will show you the way to investors.
In this white paper:
- What challenges do you face and how do you deal with them?
- Becoming investor ready in four steps!
- An overview of all funding options
Please note that this whitepaper is only available in Dutch at the moment. We are in the process of translating this whitepaper.