1. Try the “soft sell” via networking
Networking is usually the number one tip for new entrepreneurs for good reason—networking allows you to pitch your startup in a less formal, more organic fashion.
“If you’ve been building a great business, getting out and networking within the local startup and investing community can be a great way to meet investors,” recommends Diana Goodwin of AquaMobile Swim School. “Most of my meetings with investors developed by being out at an event and mentioning my business.”
On the surface, it seems like it could be a little awkward. After all, you’re still selling your business—won’t that put people off? Not necessarily. “If they seem interested in your business, they will keep the conversation going,” says Diana. “Letting things happen organically can yield great results.”
While there is something of an art to the organic soft-sell, when done right it can make investors more likely to consider your business. After all, you’re not just pitching your idea—you’re also strategically relying on the social capital built through the networking process to influence their investment decision.
2. Show results first
It can be a difficult cycle to break: You need money to get customers, but you need customers to get money.
A catch-22 this may be, but it’s worth making an effort to acquire customers or users before you approach an investor, rather than seeking funds first and customers second. “Make a plan to get your first customer that doesn’t depend on huge outside investment,” says John Rood of Next Step Test Preparation.
Why is this so important? “Particularly if you are a first-time entrepreneur, it will be much easier to get investments on good terms (particularly from non-institutional investors) if you have some traction first,” he explains.
Investors want proof that your idea is going to work, and nothing proves this better than having real, paying customers.
3. Ask for advice
Instead of cold calling investors begging them to invest in your business, consider asking to pick their brain first. “Cold calls or emails asking investors to consider your startup generally come off desperate,” says Hussein Ahmed of Transpose.“Instead, I prefer to seek out advice from investors that I admire.”
By strategically reaching out to an investor for advice first, you may be able to build a relationship with them that will result in a greater willingness to invest in your business later on. It gives them a chance to point out potential flaws in your business and shows that you value their input. “In my experience, asking for genuine advice can often lead to an engaged, passionate investor,” says Hussein.
4. Have co-founders
When you approach investors, you’re not just selling them on your product or service; you’re selling them on your team. “Angels and VCs often look for talented co-founders, as opposed to a single founder, which is a rarer case,” says Ben Lang of Mapme.
With that said, don’t take on just anyone. Choosing the right leadership team for your startup is a delicate process, as having the wrong co-founders can ultimately be more hurtful to your business than having no co-founders at all.
However, if you can find the perfect co-founder, it can make the starting process infinitely easier—even beyond attracting investors. “Starting a company alone is very difficult,” says Ben. “Having partners gives you people to rely on, which can be a huge boost for your company.”
5. Pitch a return on investment
While investors may believe in your business, their investment is ultimately a means to an end—they need to make money on their investment. So, it’s important to highlight what they will personally gain from investing in your business.
“Whether you’re pitching an angel, VC, or your rich uncle, it’s imperative to show how you’re going to get them a return,” explains Nick Braun of PetInsuranceQuotes.com. “It’s tempting to focus on yourself and your business model, but ultimately, investors want to know what’s in it for them. The best way to stand out and get interest is to clearly illustrate how and when you will get them a return.”
6. Find an investor that is also a partner, not just a check
An injection of cash into your business is great (and, realistically, it’s what you’re after in the first place), but be on the lookout for investors that can really add something tangible to your business beyond just money. An investor who can help make your business stronger—whether through advice or industry connections and knowledge—will ultimately serve you better than an investor who has money to offer and nothing more.
“Ask them how they view your company, what they see your company accomplishing, and their ultimate growth goal with your company,” suggests Aron Susman of TheSquareFoot. “It’s ideal to find an active investor, instead of one who plans to put in some money and leave it at that.”
7. Join a startup accelerator
“For first-time entrepreneurs with no direct VC connections, I recommend applying to reputable startup accelerators that can lend their network and credibility to your startup,” suggests Vishal Shah of NoPaperForms.
From mentorship opportunities to working out the kinks in your startup process, joining an accelerator can be hugely helpful for new startups. While it doesn’t guarantee that you’ll snag investment, it does make your startup a more appealing investment candidate. “Graduating from a top accelerator such as Y-Combinator or TechStars does not by itself guarantee funding, but it can significantly improve the odds that you would raise a follow-up round at a favorable valuation,” Vishal explains.
8. Follow through
You’ll probably have plenty on your plate once you begin seeking startup investment, but if you say that you’ll follow up with a potential investor, follow up.
“Fundraising is usually not a quick process. Engage a potential investor before you actually need the money,” suggests Douglas Hutchings of Picasolar.
Douglas’s advice for how to keep potential investors in the loop? “Tell them where you are currently, where you will be before closing the next round and what the new capital will enable you to do. Get them to agree that the metrics make sense and then hit them. Everyone likes someone with a track record of doing what they say they will do!”