How to Attract the First Investment for the Development of a Startup?

Raising capital is one of the most difficult tasks that an entrepreneur faces at the stage of creating or expanding a business. Most founders are completely unaware of how to seek investment: who to contact and how to present themselves.

Newbies often harbor illusions about the uniqueness of their ideas and believe that it is possible to receive funds on the first day of meeting with a potential investor. But almost all attempts to attract funding in the early stages fail due to the fact that most startups are not yet ready for third-party investments.

Are You Ready to Attract Investment?

Before asking for financial support from an investor, take a hard look at your powers and answer the following questions:

  • Do you have a strong and experienced team?
  • Does your startup have a prototype or a working product?
  • Have you evaluated the level of demand for your product and the potential of the market?
  • Have you calculated the business model and exit plans?
  • Do you already have customers?

If the answer to most questions is a no, then you are not yet ready to raise serious funds. Smart investors have long been investing during the idea stage when all you can show is a PowerPoint presentation.

Required Minimum to Attract the First Investment

  • Presentation with the following slides: problem, solution, market size, product, traction, team, competitors, financial indicators, raising capital and using it;
  • Product prototype;
  • Preferably a waiting list of customers who are ready to purchase your product.

The best way to attract investment is to achieve results on your own. In the early stages of development, it makes sense to conduct business with minimal costs and without attracting large investments. If you are not able to move from a dead point without third-party investments, then you are not yet ready to attract them.

If you are able to overcome difficulties, tolerate defeats and crises and each time take up the business with new forces, then in the eyes of the investor you will be much more attractive than a person with a good idea, but without “combat” experience. Prove that you are worth something as an entrepreneur and can proceed without outside help.

You can not competently dispose of other people’s money without having real experience. And even if you are told at a business training that the first thing you need is to attract investments – do not listen! Otherwise, if you lose the money you will have to return it with interest.

“A start-up doesn’t mainly depend on money, but your entrepreneurial experience. Investors prefer not to invest at an early stage to people who have never done business” –  says one of the best business accounting firms in NYC.

Internet Promotion

Blogging in social networks about the process of creating a startup

This will help to find useful contacts and gather around the project people interested in its development. You will also receive feedback and will be able to directly get customer feedback on your product or idea.

Communicating directly with entrepreneurs on social networks

We live at a time when it is easy to write to an entrepreneur or an investor via social networks. The minimum you need is to have a good profile with an adequate description and photo. To increase the number of connections with people who could invest in you, hire two assistants to help out. That way you won’t waste your time on primary communication.

Each of the assistants will communicate with potential investors in different social networks (for example, Facebook and LinkedIn). Create a communication script before they send a presentation about your project. If he is interested, you personally connect to the conversation.

Remember that you have only one goal, to gain the interest of the investor. It should be extensive and specific. Write right away what your project is, about your team, at what stage of development you are and what you need. Explain your potential and what capitalization you can really achieve.

Remember that virtually all investors are looking for a startup that could increase its investments several times.

Advertising from entrepreneurs

In order to expand the number of potential investors, you can turn to ads from active entrepreneurs in social networks. If you have a really cool product or startup, you may agree on barter advertising (your product will be as payment for advertising).

Offline networking

Stay inside a start-up party to personally intersect with potential investors. Attend meetings and industry events, find an opportunity to get into training centers and business communities.

Deal with People Involved in Attracting Investment

There are many entrepreneurs who make money by helping find investments for a percentage of the invested amount. You can find them on social networks.

Many of these people take a fixed percentage of the investment. In this case, be sure to check them: find out with whom they have already worked, ask for feedback. There is a lot of “pseudo-consulters” on the market who speaks beautifully but can do little.

Having ascertained the competences of the found person, be sure to conclude an agreement with him. Register, for what he will receive the fix, what tasks he will perform, what his KPI indicators will be.

Wrap Up

In addition to the methods described above, there are many other ways to attract investments: crowd investing, accelerators, venture funds. The main thing is not to be taken advantage of!

You need to clearly define:

  •  how much you want to raise
  •  what share to give
  •  what your deadline is

Be prepared to receive rejections and treat it adequately. If you have a great product and a strong team, then getting an investment is a matter of time and number of attempts.

Muhammad Saad Khan

Experienced Finance Officer with a demonstrated history of working in the marketing and advertising industry. Skilled in Microsoft Word, Income Tax, PowerPivot, Management Reporter, and Microsoft Dynamics GP. Strong finance professional with a ICMA (Part Qualified) focused in Accounting and Finance from Institute of Cost and Management Accountants - ICMA. I write finance related article in my free time on TrendMut.

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