Sooner rather than later, your startup will need to attract investors to stay afloat and to officially graduate as a small business. Attracting investors is a tad bit different from appealing to banks or Kickstarter users for money. Investors, in general, scrutinize business operations more than other types of financiers. For example, a bank mostly cares about your credit history when approving your startup for a business loan. An investor, on the other hand, will care more about how you run your startup than your unpaid student loans.
Startup owners might find it nerve-wrecking at first to appeal to investors. Some others are confused about exactly what the investors expect to see. If you fall into either of these two groups, check out the following tactics that will make your startup look highly attractive to potential investors:
Verify the Numbers
All good investors hawkishly analyze the accounting numbers of a company they hope to entrust their money to. Therefore, your financials must be in extremely good shape to appeal to a potential investor. If you are serious about anyone investing in your startup, you should have your books going back at least three years audited by a reputable accounting firm. The point here is to increase the confidence an investor might have regarding your startup.
Investors like startups that are highly productive and efficient. Obviously, becoming more efficient in your operations has benefits beyond appealing to investors, such as increasing overall revenue. Therefore, take steps now to make your company as efficient as possible. There are many simple ways to improve your overall efficiency. For example, you can eliminate paper use and digitize everything, or outsource certain non-core operations to save up on production costs. Investors will perceive such efforts on your part as responsible and committed to making the startup successful.
During your discussions with potential investors, you will be repeatedly asked questions that will help investors determine the credibility and the legitimacy of your startup. Investors would want to know that all company operations are run smoothly and according to law. Presenting audits as mentioned above is one way to achieve this. Also, additionally, you can hire a consulting firm like Global Resources to provide an accurate third-party analysis of your business. Rather than the figures you provide, investors are more likely to be swayed by positive opinions of your startup provided by a reputable outsider with no vested interest.
Create a Long-Term Strategy
You might have a long-term strategy for your startup in mind. However, potential investors cannot read your mind. Therefore, you should have a presentation or a document detailing the future goals that you have for your tiny startup. It’s very important to make sure that these future goals are realistic. Sure, you might hope to make your company huge like Google or Apple one day. But, that’s just a dream. Your investors are only interested in future projections based on real-life statistical trends. Therefore, solid estimates are what should be included in your long-term strategy plan.
In a nutshell, investors will like your startup if it is reliable, well run, trustworthy and already generating profits.