It’s the moment every budding entrepreneur has been waiting for. You finally secured a meeting with potential investors to discuss your business and potentially receive a much-needed capital infusion. But first you should ask yourself one question…
ARE YOU PREPARED?
The ability to answer this question depends on the entrepreneur or business, but is definitely an important aspect to consider. Experienced investors typically have an extensive history of meeting different startups, and as a result inherently take notice of which companies come prepared versus the ones that don’t. Preparedness speaks volumes about how fully baked a business is, as well as the level of performance that the team will bring to the table.
There are several areas on which to focus so you are prepared for the countless questions you will receive about your business.
KNOW YOUR BUSINESS MODEL
Having a business idea is wonderful, but knowing how you plan to sell your product or service is just as important as the idea itself. This will show that you have considered the best strategy to avoid the hurdles of selling your product to the serviceable market. Investors want to feel confident that you have research the various options, and landed on your model as a logical conclusion to your research.
KNOW YOUR NUMBERS
Having a firm grasp of the numbers shows how well you know your product and business. When investors ask questions at the end of the pitch, they are expecting you to be able to answer them regardless of the area of business to which it relates. An investor is more likely to continue negotiations if they feel a company is well prepared and has a significant understanding of their business.
BE HONEST ABOUT WHAT YOU KNOW OR DON’T KNOW
One of the traits that can be worrisome to an investor when evaluating a team is when they blindly believe that they know everything. It’s ok to admit when you don’t know an answer, investors would much rather hear you admit that rather than attempt to pull data out of thin air to provide an answer. It will help us sleep better at night if we have confidence that you will not make decisions on a false belief that you have all the answers.
BE FLEXIBLE AND OPEN TO FEEDBACK
If we are going to be able to work together, we need to know that you are malleable. We are not only investing in the idea, but also the team that has been formed to execute the vision. A team that is incapable of receiving feedback will have a tough time finding investors, because this rigidity is a clear indicator of how difficult it may be to work together in the future. A business relationship should be a fun experience where there is a free-flowing exchange of ideas. As investors, we not only provide capital but also valuable guidance.
UNDERSTAND THE IMPLICATIONS OF YOUR VALUATION
Although there is the old saying “it’s worth what someone will pay for it”, this doesn’t really hold as true to investing in startups. The valuation of a company is based upon the intellectual property, the sales history, the team, and possibly goodwill if applicable. These factors are combined together to form a valuation, which in turn impacts the equity percentage that is being sold based upon your capital request. Do not over-value your company! I can’t say this enough, because your valuation is an indicator of how realistic you are as a businessperson. If you are unreasonably overvaluing your company, then we will be concerned about how realistic you will be in other areas.