Things Investors Look For Before Investing In a Start-up

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Let us give you a reality check: starting a business is an expensive dream. Not everyone has enough cash to invest in a start-up and there are considerably less start-up businesses that have succeeded without any outside help.

If it has been your lifelong dream to start a business venture, it is necessary that have the initial amount to set up your new venture. Unless you have saved yourself a fortune, it is hard to get hold of such a big amount to invest. But if you are in need of some money quickly, claiming PPI can be your chance to get hold of it.

Mis-selling PPI scandal has been biggest financial headline across the UK. Millions of people were mis-sold the PPI policy alongside their loan, mortgage and credit cards. If you are among the millions who are yet to make a claim, it is time!

The compensation amount can then be used as an initial investment for starting your new venture. Another way you can seek funds for your start-up is by talking to investors.

Remember that investors are fundamentally different from the lenders and you as a start-up owner will have to consider that while deciding what kind of funding you pay require. Lenders give you money and you repay it with interest, while investors give you money in exchange for ownership of part of your business.

However, an investor may have certain restrictions, such as, you might have to get approval for transactions over a certain amount or you have set up an independent Board of Directors. Along with these restrictions, investors also have certain rights. You should discuss these rights with your lawyers before making a deal with an investor.

So, if you have decided to seek funding from investors, how can you draw them in? What makes an investor want to invest in a business?

More than anything, any investor would want to see a return on their investment. Investors are in the business of investing money into start-ups and growing businesses so that they can make money.

So, if you can make them believe and demonstrate the fact that your business will make them money, you are already 90 per cent there.

To achieve the remaining 10 per cent, we have broken down the top three criteria many investors will use. This will help you develop your best plan and your best possible chance to earn capital for your start-up funding needs.

1: A Rock-Solid Business Plan

Having a strong business plan presented to your potential investors will make them notice that you are serious about your business and that you have given though to your plans to make money.

However, remember your business plan alone is not enough to convince an investor to back your business. But no investor will readily invest money in your business if you do not have a business plan.

Most of the things included in your business plan should be:

  • Your target market, with statistics that show why is that your target market
  • Data-based, hard number financial projections
  • Sales channels, with statistics that show why those channels will be effective
  • Your marketing plans and goals, with statistics that show why those plans will be effective
  • Analysis of the competition for your product and service
  • Projected timeline for when you will start making money
  • Any potential issues and your plan for dealing with them

2: A Unique Idea

Both investors and the intended audiences will get excited about the words “new and innovative.” What we mean is if the market is full of identical products and services like yours, then your company isn’t likely to be a huge hit.

So, it is your responsibility to convey it to your investors that what your products and services are and what makes them stand out. Is there any market potential for your unique products? Does it solve a unique problem? Is it a brand-new innovation or invention?

However, you don’t always have to come up with a brand-new invention, but it is your responsibility to show your potential investors why your products and services are different or better from the competition. This is what we call competitive advantage.

3: A Strong Narrative

There are a lot of interviews that investors have to go through. But given a situation where two companies need investment and they both have similar projected returns, what would make an investor choose one over the other?

The answer is the story! Remember that your investors are people and not robots. They can be won over with a great narration about why your business matters to you, where your business idea is inspired from and where you are planning to take it.

So, if you present your story confidently to your potential investors, it is a great way to set the tone and draw them in.

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