By Deborah Holmén, M.Ed., NBCT
Launching a new product or business can be an exhilarating but challenging process. One of the biggest hurdles entrepreneurs face is attracting and securing investors. Investors play a crucial role in providing the necessary funding and resources to turn a startup into a successful venture.
Two of the most commonly used practices are Venture Capital and Angel Investors.
- Venture Capital can be defined as a firm investing money in companies with high potential for growth and profit. Large institutions like pension funds, universities, corporations and wealthy individuals furnish the money used for the firm to invest. Typically, the firm becomes part-owner of the business and helps them become successful. They also offer guidance, networking opportunities and help the company grow.
- Angel Investors are private investors who provide money to help new businesses. They usually fund smaller amounts, like $25,000 to $100,000, but sometimes more. They invest in ideas that interest them, while Venture Capitalist Firms invest based on strategy. Angel Investors can also give advice and assistance based on their own experience.
So, what should entrepreneurs tell investors about their product or service that might convince them to invest in their vision?
Ben Patz, a managing partner at DeepWork Capital, shared some key aspects that can help entrepreneurs seeking funding create a compelling and irresistible pitch.
Patz said, “First and foremost, you must prove that you are a reputable person. Investors need to have confidence in your abilities and trust that you will deliver on your promises. Showcase your track record of success, highlighting any relevant experience or expertise you possess, and provide references or testimonials from previous clients or colleagues. Demonstrating your credibility is essential to instill confidence in potential investors.”
Patz also said that many entrepreneurs need to take advantage of another critical step. “Focus on presenting your cool idea. What sets your product apart from the competition? Emphasize the unique value proposition and explain how your innovation fills a gap in the market. Paint a clear picture of the problem your product solves and how it can positively impact the lives of consumers. Investors are looking for disruptive ideas that have the potential to revolutionize industries and create substantial returns.”
“While a great idea is crucial, the time commitment is equally important. Investors want to see that you are fully dedicated and willing to invest your time into making your product a success,” said Patz.
“Talk about the sacrifices you have made and your unwavering commitment to your vision. Remember, time commitment is a strong indicator of your passion and determination, which can be contagious and inspiring to investors.”
Financial investment is undoubtedly crucial, but investors value time commitment even more. Patz said that entrepreneurs can obtain money from various sources, but only some are willing to commit their time wholeheartedly. “Entrepreneurs ready to showcase their dedication and willingness to do whatever it takes differentiates them from other entrepreneurs who may shy away from the demanding tasks of building a business. Investors are likelier to bet on someone in it for the long haul.”
Early-stage venture investors are particularly interested in whether the new company has solved the problem associated with its product. Highlight devised solutions and how they have been tested and validated. Be prepared to provide evidence of technical competency to reassure investors that the product is feasible and market ready.
When presenting a business to potential investors, consider incorporating these tips for a successful pitch:
- Clearly articulate the company’s vision and mission – Investors want to understand long-term goals and the purpose behind the product.
- Demonstrate market potential – Present convincing research and data showing significant market demand for the product and project future growth.
- Showcase the team – Highlight the skills and expertise of the company’s team members, as investors are also investing in the people behind the product.
- Present a comprehensive business plan – Outline marketing strategy, revenue projections, and milestones to demonstrate an understanding of the business landscape and the company’s roadmap for success.
Overall, the choice between an Angel Investor and a Venture Capitalist Firm ultimately depends on the entrepreneur’s needs and the stage of the business. While both offer valuable support, networking opportunities, and funding, Angel investors might be a more appropriate choice for a smaller passion project, while Venture Capital Firms could be of greater benefit to global business solutions with high growth potential.
With the right mindset and preparation, any entrepreneur can attract the ideal investor who will help take their business to the next level.
