Many entrepreneurs are under the illusion that they will find funding for their startup within a few weeks of dedicated effort. They then experience the harsh realization of rejection. Some of the most successful funded entrepreneurs have shared how their startup was rejected hundreds of times before gaining their first investor. While it took time, hard work and great perseverance, it also required that they learn about funding just like any other aspect of their business.
An entrepreneur pursuing funding should know that there are points when angel investors who have a critical role in funding startups may be more open to invest. Unfortunately, many entrepreneurs miss those opportunities because they pitch their venture like a broken record or a poorly learned script, repeating many of the same tedious details about their startup that loses the interest of the investor.
Instead, once the right potential investor is found, typically in the startup’s industry, a relationship should be nurtured. So the most fundamental action an entrepreneur can take is to create a narrative of progress and share that progress when they meet up with that investor again. They need to learn more about what motivates investors to invest.
Here are five things an entrepreneur can do to be better seen by potential investors and how to nurture a relationship:
- Identify angels and venture capitalists who have a track record of investing in the same industry and find a way to be introduced or for you to introduce yourself– and that then includes giving a well-honed “pitch”. If you have not refined your pitch, keep the introduction light, yet make the conversation interesting and insightful. You are setting up for the next meet!
- Once you have found potential investors who fit your domain, take it one step further by exploring their prior investments to gain insight as to what makes them pull the trigger. Size up your venture against the investor’s prior deals and look for similarities. Find out if they are already invested in a competitor!
- Learn who are the executive directors and managing partners of angel groups and venture capital firms. They can be very helpful in gaining other introductions, so just getting onto their radar is an accomplishment. Don’t mess this up by throwing out killers such as: high valuations, there are no other competitors, an absence of skin in the game and so on. Educate yourself about funding to know the lingo such as due diligence, term sheets, non-disclosure agreements etc. Don’t come off as a total novice by winging it.
- One of the most time efficient ways to eventually land the right investor is to build a relationship through dialog. You should be able to communicate the reason you have started a venture and one reason is your expertise. Being able to distinguish your startup by conveying true expertise is one hint to an investor that you are capable of scaling up your venture—if you don’t have expertise about your own products and services, you are not a fundable entrepreneur.
- As you grow your startup be aware of the key milestones you pass and then share those points over time with your targeted investors. They love to hear how much progress is being made before investor dollars are brought in—it displays to them how resourceful an entrepreneur is with funds. That is one of a number of common traits that an entrepreneur has that investors value.
Avoid speaking repeatedly about the features of your products or services, but rather focus on what is compelling to an investor for them to jump in. One point is when they hear of key milestones being passed. That signals to them that their funds may move a startup forward more quickly to their next key milestone and often that is to another funding round. The entrepreneur scaling their venture more quickly as a clear result of investor dollars is a key validator for more funding.
Read How Female Founded Startups are being Funded
Jeanne is the Publisher of American Entrepreneurship Today ®, a web site dedicated to helping entrepreneurs and small business owners succeed. She consults via AEP LLC., as a growth strategist, steering entrepreneurs through startup pitfalls, while identifying resources and opportunities that catalyze a venture to a greater level of success. Copyright AEP LLC 2019-2020
