492 business founders were recently surveyed to find that 47% of startups fail because of insufficient financing. Why would that come as a surprise? Even the behemoths like Apple, Google, and Amazon went from startups to market leaders thanks to outside funding.
Seeking investors to support a startup is not a cheat, but rather a smart move. Bringing a disruptive product or service to the market involves associated costs related to product development, marketing, and other business tasks. While a small team of entrepreneurs may struggle to cover these expenses, outside funding can help them break through.
Why you might fail without investment
Most entrepreneurs think that customers will come beating on their doors once they introduce a new product. Unfortunately, that’s not the case. While the first few customers may come unannounced, it takes a great deal of effort to maintain interest.
Attracting and winning customers is quite an expensive task. Most often, the customer’s lifetime value is less than the expenses put through to acquire that customer. That’s why the early stages of a startup’s development are when it is most vulnerable. It is why without proper financial support and the help of a powerful investor your chances of failure are high.
The right time to start looking for an investor
Generally speaking, the best time to find an investor is in the early stages of a startup. It will gain you the momentum needed to quickly climb the market ladder. However, until you reach a certain level of success, you might not spark enough interest for the investor to support your business idea.
According to John W. Mullins, a three-time entrepreneur and professor at London Business School, the right time to start seeking investment is when you’ve established a formula for getting paying customers. If you are ready to present this idea to an investor, then you are good to go.
To improve your chances, understand that investors are looking for more than a sparkling product. They want to see a clear vision and signs that your project is already on track to reach high goals. Having loyal customers, sign-ups for a project demo, brand partnerships, and media attention all play into your book to acquire an eager investor.
How to find investors for your startup
As a startup founder, you’ll need to meet and form real connections with potential investors in order to seal their funding. Networking is the best way to go about it.
People who know how to find investors are persistent and resilient. They are usually great at networking and communicating and have these two key traits:
They easily find their way around middlemen and reach key decision-makers
They bounce back and recover from rejections very quickly.
A good place to start your networking journey is LinkedIn. Its premium features allow you to set filters and find specific types of companies. Most investors have the terms "capital," "venture" or "investor" in the head of their profile. Starting from there you can also expand your circle and meet investors on the spot at conventions, trade shows, incubators, and accelerators.
Once you’ve generated enough buzz for your startup through networking, you might even receive some incoming offers. But don't expect to be invited to Shark Tank straight out of the gate! Do your homework and make your startup attractive to potential investors. Prepare to pitch your idea and business model.
For most investors, what they care about in a pitch is:
Your business model
The technology behind the product
Your growth strategy.
Present hard data on how you’ve grown and made a profit to this point, and how you plan to continue to grow further. Show them a clear investment structure and plan where they can see the value of investing in your project.
Where to find ideal investors for your startup
We recommend starting your quest for funding by brushing through resources like NFX, Crunchbase, and AngelList. These have information on companies and the investors that funded them. It’s easy to find someone who invested in your industry or a similar type of product.
If you prefer pitching business ideas by email, you can use a tool like Hunter.io - an email finder to look up the investor’s contact info. Of course, cold emails or direct messages on LinkedIn are not always the best way to go. Investors may receive hundreds of offers a day, so your pitch can easily be lost among the masses. A better way to go about it is via special networking platforms that have been recently appearing.
Our platform Go Global World, create a network for startups, and investors to connect and achieve mutual goals. The platform gives opportunities to match you with relevant investors and get a warm interest. All members of the network are vetted before they join.
Aside from that the platform is a full-on portal for startup development and offers incorporation, tax and account services, and helpful materials, including pitch deck templates, industry reports, and legal documents.