Building a startup seems easy to do, but it’s very hard to execute. A common myth among new entrepreneurs is that an idea determines everything. If you’ve ever been through the process of raising money, you know how valuable the execution of an idea really is.
I’ve never formally raised money through angel investors or venture capital firms, but I’ve been given numerous offers. I’ve even gone into the room and made pitches, but I decided against accepting the money.
The reason was that we didn’t need that money to be successful. Some companies however do need to raise capital to grow their business. From my experiences pitching to investors and starting successful businesses, I’ve learned a lot about how to prepare your startup.
Here are 5 ways to prepare your startup before pitching to investors:
1. Show Progress
Most investors will not fund an idea. They look for entrepreneurs that have executed an idea and shown some kind of proof-of-concept. Ideas are 1% while execution is 99% of the startup game.
Do not pitch your startup to investors when it’s too early. You should put together a proven business model and show traction before taking your startup to VCs.
2. Have A Plan
Investors aren’t coming on board of your company to create a plan. They are looking for entrepreneurs who know what they are doing. Investors love to see a plan of what you plan to do with their money and how they will get a return.
Investors are funding your business to get a return of at least 10x. You need to show your investors that you have a plan that you are well-prepared to execute.
3. Have A Well-Rounded Team
Figure out what roles are vital to your business and show investors that those positions are fulfilled properly. If you’re a tech company, investors want to see that you have strong design and development resources.
Polish up your teams’ skills and show investors that you have the talent surrounding the startup. Team is more important than the idea in many cases.
4. Have Purpose
Investors are in it to make money, but they don’t invest in ideas they aren’t passionate about. If they see that your team is only interested in making cash, they will be more hesitant in investing.
Show them a reason why you’re passionate about what you do that goes farther than the money. Investors want to know you will make the best decision for your startup, not for your wallet.
5. Give Them A Reasonable Exit Strategy
Investors feel comfortable knowing that the money they invest in your business won’t be totally lost. The reason why we got many offers for investments were because we gave investors an exit strategy that made sense.
If your business was in trouble, what would you do to get out of it while protecting everyone’s investments? Think of a solid answer to this because every investor will ask you this question.
Raising capital for a startup is extremely difficult. It requires a lot of patience, persistence and planning to successfully get the funding you need from the right investors.
Photo Credit: ABC Shark Tank