For the first-time entrepreneur or founder, looking for seed stage funding may prove to be challenging. Many startup founders look for advice to pitch to investors while their idea is still at a concept stage. The biggest challenge most of them face is they don’t know how to attract investors and what factors influence their decision to invest.
Before understanding how to attract investors, a startup founder needs to learn where to find investors to reach them.
- Friends and family:
Your friends and family know you best. They know your strengths and all your negative attributes. However, if you decide to go with this option, let them understand that investing in a startup is a risky affair and they should only invest if they are willing to take the chance to risk their money. Don’t forget, mixing business with personal relationships can turn into a messy affair. - Individual Angel Investors:
Another route you can take to raise investment is to find an individual who is prepared to invest in the idea of a startup. The investor has to understand your area of expertise and could bring value to your startup. Think of people you may know who fit the criteria, or of people you know who are connected to such individuals, to make an introduction pitch. - Angel Investor Firms/ Venture Capital Firms
These firms are continuously seeking to make investments in startups. Check the map of Lebanon’s startup ecosystem to see the list of the major players looking to invest in Lebanese startup companies. With firms such as these, you could raise a much larger investment than from an individual. - Startup Advisors/ Accelerators.
Startup advisors would understand you better and guide you in the right direction. They would also assist in bringing in the right investors for your startup.
Once you have decided on which route you want to take, understand what it is that investors look for in a startup before you approach them.
- Experienced Entrepreneurs:
The investors prefer more experienced entrepreneurs rather than someone who is completely new in the field; however, don’t be discouraged if you do not have the experience, as this is a completely new field and is not the only contributing factor. - Team:
Investors will check the entrepreneur and the team, if one exists. They prefer entrepreneurs who are passionate and excited about their idea and their vision, who are tenaciously willing to stick to their vision through challenges and obstacles, who are willing to reevaluate and adapt their plans when needed, who are capable of working with a team, understand their market, and are coachable. - Customers:
All investors are going to take a look at your customer base. You will have to consider the acceptability of the product in the market. What would compel someone to buy your product or service? What problems would your product solve and how is it better than the alternatives? Positive responses to questions such as these will be a major factor to attract investors. - Opportunity:
Investors are constantly seeking big ideas that can create an impact, change our behavior or our way of thinking. They also consider if the market is ready to embrace your big idea or if it is an opportunity that the world will not be able to recognize for several years, hence the payoff will be delayed. - Business Model:
Investors will definitely look at your business model in terms of analyzing if the model is profitable, expandable, repeatable, predictable, and so forth. By studying where revenue will come from and challenging the expenses it would take to generate that revenue, the investor can decide if this investment is worthwhile. Moreover, your business model will assist the investor in creating a probable plan on when they would be able to generate profit and exit accordingly.
Self-evaluate your startup based on these tips, and if you find areas where you do not excel in, work on improving them. The extra time you invest will significantly help your chances of getting invested in.
