Sometimes it helps to better understand what your target market is looking for before spending anytime packaging your product or service. The same is true for investing; you need to know what investors are looking for in new opportunities before you can pitch your company.
We have devised a few points that entrepreneurs or leaders of emerging growth companies should keep in mind before stepping in front of any investor.
1. Management Team
Investors are looking for a company that will utilize their capital efficiently and effectively. Moreover, experience counts. This is why most investors will seek emerging growth companies who have seasoned executive teams that will lead the company to profitable growth. With that being said, it doesn’t mean you will not be able to get an investor if your team lacks experience, but it may be more difficult. Strong leadership can be the key to successful business growth. A great product or service is only part of the equation, whereas in the eyes of some investors, business success is a 70/30 split between management and product/service. In effort to exude management strength, bringing on advisors or having a board comprised of seasoned veterans can help secure capital.
2. Industry Knowledge
As noted in No.1, investors are looking for someone who can take their funds and create profitable business growth. With the idea of industry knowledge in mind, this refers to whether or not the company understands the industry and are able to demonstrate their knowledge through well prepared presentations that include: market share, target demographic, cost per acquisition, profit margins, operation costs, and breakeven points. This only scratches the surface, however, the more key information you can provide, the better.
3. Knowing Your Competitors
This is often something that can be overlooked, especially within young and inexperienced entrepreneurs. Investors like to see this information for a variety of reasons, one of which could be simply that you’ve done your due diligence, or even your research on the product or service you are offering.
4. The Numbers Count. With or without Sales
As simple as it may seem, investors are looking to see numbers. They want to see projections that describe your company’s future growth, conservatively. When creating these documents ensure that the figures you are basing them on are firm, researched, and are relative to the industry you are operating within. Most investors will do their due diligence before moving forward with anything; so do it right the first time.
No, we’re not referring to a luxury sedan, we’re talking about impact. The impact your product is making now, today. This concept can weaken entrepreneurs early as they believe they lack the results or proven concept before they can acquire funding. This isn’t the case, if your concept or business is genuinely a good investment, VC’s especially will want to get in as early as possible. Why? Its cheaper! A VC can as much as 100k of their capital because in 3-4 weeks you might do 500k in sales and that now will bump up your price and evaluation. As they have said for decades, the early bird gets the worm.
6. Market Size
Investors are looking for management teams who are looking to dream big and be the next billion dollar company like Apple or Microsoft. Unfortunately this isn’t the case, plenty of companies these days are looking to early exit strategies once they hit a $50-60 million dollar mark. Although in cases within the Tech Startup space, initial seed investments are low and the return is high, an investor is always looking at how large they can multiply their assets when handing you a check. We suggest to never talk about early exits, quick flips, or anything that will limit the investor’s immediate growth with the existing management team he bought into.
Your company’s next presentation or Pitch Deck can be what takes you from a start-up to established. So, don’t overlook the importance of being prepared. A lot of times you only have once chance. Make it count.
Once you are ready to make the pitch, start looking for passionate and experienced investors. Exhaust your friends and family connections, then move onto investment conferences, and investment networks.