One of the ways to secure funding and keep your startup business growing is to attract investors. Whether you consult with venture capitalists, bankers, or a reliable growth equity firm, it’s important to make ways to drive their decision to invest. Here are some ways to effectively engage your investors in your startup:
Obtain Customer References
Investors prefer to speak with consumers who have first-hand experience with your services. This will help bring a good perspective about your organization that cannot be obtained by reading your company’s website or through a meeting.
They want to see the value that your business brings to your customers, the process they go through, their user experience, and what sets you apart from the competition, so have some customers ready for interviews with potential investors when the opportunity comes. Here are some common sampling questions that are likely to be asked by the investors to you and the customers:
- Differentiation: Was your product or service the most affordable? Why did customers choose you over other companies? Were there specific functionalities that are better than the alternatives? What were they using before finding out about your products?
- Customer Satisfaction: Are they happy customers? What can your company do to improve the customer experience?
- Value Proposition: Do you have a measurable ROI? What are some things your organization allows your customers to do? Does the value match up with the customers’ expectations?
- Purchasing Process: Is there a budget ready for the purchase? Who’s in charge of the buying decision in the organization? How many vendors do they speak with? What does the implementation look like?
Acknowledge Total Addressable Market
The total addressable market (TAM) refers to the potential size of your market. Factors such as the length of time you’ll be a market leader and the potential number of customers you’ll reach help determine your market strategy and steer your business the way you want it to go.
Fully understand your TAM to find out the number of prospects you can expect, the length of time that your sales pipeline remains satisfied, predictions about your market size, and your potential revenue for a specific time frame. Investors want to find out about your plans to use your resources and deliver value to your customers, so come up with a good, fluid strategy because the industry, your market, and your business constantly change.
Have a Strong Sales Pipeline
Keep in mind that there’s no business without sales. You must convince investors that people are willing to purchase your products or services, so they must stand out in the market. Prove your competitive advantage through concrete evidence and show that you have a large market potential to warrant an investment.
You can provide a track record of your sales and show them your plans on continuing to expand your pipeline to make more money. Tip: you can further explain that you plan to build a “moat” around your organization, such as using intellectual property or patents to protect your unique position.
One of the best ways to manage your sales pipeline is to focus on your best leads. This will make sure that you’re concentrating your efforts on the most sales-ready and high-value leads and avoid getting distracted by things that won’t do any improvements for your business.
For instance, by checking your sales to see which are the most valuable leads and view your sales activities for each, you can then identify which are the most engaged leads and which ones you should put your focus on.
Provide Management Team Bios and References
Investors are keen on knowing you and the entire management team — from their respective business experience to their industry background. They want to be reassured that you can lead the organization to grow and make a substantial return on their investments, so provide them with good references that will vouch for your whole team.
Other positive factors that they look for are a good track record of your performance, expertise in your current industry or former ventures, great relationship and networking skills, and the ability to establish an organization around core competencies. Make sure to exude passion and confidence and show your willingness to change course if ever the company needs to shift direction.
These tips will help you secure financial backing for your ventures. Keep in mind that investors want to know how you plan on returning their investments, so be confident and make your business attractive and exciting enough to get their attention. Persistence is key, so work hard and maintain a clear strategy to persuade them to invest in your organization.