Any founder knows the key to the success of a startup is successfully attracting investors and securing funding throughout the company's development. Finding funding is one of the most challenging aspects of a startup's journey.
As a founder, you have to highlight your startup by developing a compelling narrative that is attractive enough for investors to want to learn more and potentially invest. This 15-point checklist can help you persuade investors to take a risk and provide funding to help you reach your goals.
1. Have Clear and Attainable Business Goals
– Whether you're ready to seek out investors or not, you should document your goals. Investors want to know and see that you have clear and realistic goals and milestones for your business plan.
Defining your goals requires you to evaluate further than the simple goals like 'increasing revenue' or 'improving brand awareness.' Think about why you got into the business in the first place and what you hope to achieve. Then lay it out and document it for yourself and to show potential investors.
2. Show Your Startup Has Made Traction
– When investors look to invest in startups, they want to invest in more than just the idea. They want to see your progress and that your startup has made some traction. Investors find startups more attractive when they show exponential growth trajectories. Try to have at least six months of consistent growth to show a trend from which investors can deduce future growth.
3. Demonstrate the Market Fit for Your Product Through Market Research
– As a founder, you need to show that your product or service will fit in the market backed by real data and analysis. Collecting and thoroughly analyzing data is essential to show investors that you have a product that will succeed in the market through detailed market trends and that you are data-driven as a whole.
Research is essential to gain insight into your target audience and examine the competition. You'll want to provide details on the size of your target market and detailed analytics of the existing competition. Determine your competition's weaknesses and how your startup can capitalize on them. Finally, prove your product or service is backed by market needs.
4. Build Your Team
– You can show investors you're ready for the next step by building your team and closing gaps where your founding team is lacking. Show that you can hire and bring on top talent in their respective fields. Investors know that behind a successful startup is a strong talent foundation.
Demonstrate your ability to hire people with different perspectives and solve unique problems beyond what you already bring to the table. Highlight to investors that your startup has magnetism and you can convince people with elite talent to stake themselves in your company.
5. Present a Strong Sales Pipeline
– Your startup will need to make sales to survive, and you need to prove to investors that people are willing to buy your product or service. Show that your product or service stands out from what is already on the market.
Show your unique selling proposition using concrete evidence and that your potential target market is large enough to warrant an investment. You can do this by breaking down the sales you've already made, how your business made those sales, and how you continue to expand and evolve your sales pipeline to grow your sales further.
6. Define Startup Fundraising Goals
– When you've reached a good place and are ready to start finding investors, you'll want to come up with fundraising goals. You need to clearly define how much money you'd like to raise, your current valuation when you need the money, and what the money is intended for.
Investors want to know how your startup plans to use its proceeds and funds. Be prepared to show and explain to investors your goals and milestones that you're aiming to achieve and your expected results.
7. Show Momentum Projections
– Get investors excited by projecting your startup's forward momentum. It can be showing your metrics, hiring projections, PR and marketing plans, and more to show that your business is accelerating in more than just financial growth. When you meet with potential investors to show momentum and projections, don't oversell but detail the minimum projects you can make that will still generate their excitement. You want to be able to exceed their expectations. Show your realistic growth measurements and work hard to exceed those initial numbers.
8. Come Up with a List of Investor's Possible Objections
– Convincing investors to invest in your startup can be challenging. Create a list of reasons why investors might not want to invest. Go through each point you've come up with and write down answers to their objections.
This exercise is a great way to prepare for questions and concerns to help you respond confidently, sure to impress them and turn the tide. You're going to get a lot of people that will likely say no. Be sure to take note of their objections and any questions you encounter along the investment journey and keep finding answers.
9. Network to Soft Sell Your Startup Idea
– As a new startup, getting your name out is tough. Networking is a great way to get your business out there in front of professionals in your industry. Attend networking events to meet people in person and introduce them to your brand. Networking is incredibly valuable to get tips and tricks and meet the right people who might land you a deal with investors.
10. Create a Compelling Narrative to Tell Your Story
– Your story will go a long well in helping you attract potential investors and customers. People want to support brands with heart and a great story. Build a narrative that highlights why your startup exists. Include the problem, how your startup will solve it, and why it's possible.
11. Build a Persuasive Pitch Deck
– Developing your startup pitch deck is one of the most valuable ways to spend your time. Presentation is everything when it comes to successfully getting people to invest. Your pitch deck should have clean visuals offering concise information about the founders, the company's story, and data and analysis on the market trends and projected finances for the future.
You're going to have a limited time to present your pitch deck, so you want to make every slide count. Keep in mind investors have reviewed thousands of pitches, and you want to ensure yours stands out with creativity partnered with the ability to break down your idea clearly.
12. Build Social Proof
– Social proof is a great way to signal investors that your idea is worth paying attention to. Create a strong social media presence across the major platforms, connect with influencers, other businesses, and founders in your industry, and build up your followers by creating engaging content to expand your reach across your market. Social proof also includes highlighting endorsements from business partners, customers, and other sources.
13. Include a Cap Table
– One of the benefits for investors is the equity that comes with it. Investors will want to see the breakdown of your company through a cap table. A cap table helps investors understand the structure of your company and the potential ownership position. It shows the total securities of your startup, how much investors have invested so far, and each individual's percentage of ownership of the company.
It can also provide insights into who they will be working alongside. You should consistently update your cap table throughout the many stages of your startup's development to understand.
14. Take Care of Copyright and Legal Issues
– When you pitch to investors, they will want to know about any risks with copyright details or intellectual property rights used in the development process. Before you pitch to investors, have an attorney conduct a legal review to perform due diligence. It helps check all legal aspects of your startup and your team and can provide peace of mind for investors before moving forward.
15. Offer Incentives Beyond Equity
– One way to stand out when making your pitch to investors is to offer a stock that pays dividends. Provide your investors with cash flow instead of only the common long-term equity. Providing immediate rewards with a well-thought-out incentive package will make your startup more attractive to your potential investors. Be specific in the projected dividends and investment amounts and show data to back it.
Fundraising is a challenge for any startup, and as much as the process involves convincing an investor to fund your company, you want to be sure to choose investors that align with your values. Becoming an investment-worthy business is critical to your success. Review and follow the 15-Point checklist, and you can help attract the right investor to build your company.
Finding investors for your startup can be time-consuming and stressful. When you need the capital to get your startup off the ground, Angel Match can match you with over 90,000 angel investors and venture capitalists in one place. Learn more about how Angel Match works here.