You've come up with the perfect business idea. You know exactly what you want to create, how you want to do it, and who you want to sell it to. The only problem is that you don’t have the money: and that’s where investors come in.
Investors will put money into your business with the expectation that they’ll receive a profit in the future as your business grows.
Pitching your ideas to them can be stressful, but you’re not alone: most businesses need financial aid at one point or another. Here are six of the most common types of investors you’ll encounter while you’re out looking for support, and how to react to them.
They might not understand exactly what you’re trying to sell them, but they’ll assume they do based on their own experiences.
This is especially common in the tech industry and happens when investors simply don’t understand the technology you plan to utilize. They might jump ahead of you and assume they know which direction you want to build in, and what exactly your product does.
There are some simple and effective ways you can counter this: come armed with visuals, a prototype if possible, and graphics. These can help show exactly what you have in mind.
It’s important not to let an investors personal experiences run the show. Instead, guide the conversation back to what it is you’re actually doing, and focus on your value proposition.
They like your business; they just don’t like you. Chances are you won’t be able to win over a sceptical investor, which is probably for the best. Working with someone who doubts your ability at every step and monitors you closely -expecting you to slip up- can be tiring and invalidating.
Try to find out exactly what the problem is and if there’s any way you can fix it before you go to speak to more investors. But if nothing they say makes sense, consider yourself lucky to just walk away.
They want you to succeed! They want you to grow and build a viable business, and they’ll help you get there. Before investing in you, however, they might want to see just a little more growth or traction, which is totally fine. Take their feedback, implement it if you can, and be grateful for their input.
A healthy relationship with a mentor investor is priceless. They’re often experienced business-people themselves, and if they can steer you in the right direction (and support you financially once you’re on your way) it’s a win-win.
They might be nervous about investing in you if no one else has, but the second someone else supports you they’ll consider it. Copy-cat investors can give you great advice and direction, and if you can find out what’s holding them back you might be able to win them over even without another investor.
Chances are, however, that you’re better off maintaining a healthy relationship with them and checking back in once you’ve secured finances from someone else first. Once another investor has taken the plunge, they’re more likely to take the leap too.
“So, what are you having for lunch in five years?”
Microscope Investors often want to know every little detail about your business, even details which are impossible to accurately provide ahead of time. While it’s not uncommon to be asked for a business projection, you simply won’t be able to answer the tiniest questions too far in advance.
The only thing to do is explain where you want to be headed, and be transparent: you might not know the intricacies of how you’ll get there, but you already have a plan in place and you’re flexible- willing to adopt new technologies, learn and grow as time passes.
There’s a key thing to keep in mind when it comes to investors. You might get knocked back and rejected over and over, but that doesn’t mean you should jump at the first person who says yes. While you might want support, it’s important to find someone who fits into your business ethos, and whose greed won’t damage your growth.
If an investor is asking for more equity than you expected or proposed, talk to them about it. Find out why they’re asking for so much, and either reach a compromise or try to raise your valuation.
Keep your options open! The perfect partner is somewhere out there for you.
Each rejection is a learning process, and each investor who supports you is a win. Either way, looking for investors is a valuable way to spend time. Investors can teach you about the strong and weak points of your business, help you see it through fresh eyes, and inspire you to strengthen your business and how you pitch it. The more you put yourself out there, the higher your chance of success and the more you’ll learn.