How to Get Investors, Part II: 3 Things Prospective Funders Want to Know
You’ve already developed a business plan, done your research and perfected your elevator speech. And you know how much funding you need and for what. (If you haven’t finalized these steps, check out How to Get Investors, Part I: 4 Ways to Prepare Your Business for Startup Funding.)
Now, it’s time to make sure your venture looks its best to potential funders. Think of it like dating. In any courtship, there are basic facts people want to know and vibes they want to get. Here’s what investors are looking for:
- Why you’re passionate about what you do
- How you are personally diligent and confident
- What they stand to gain from an investment
Ready to rethink your business dating profile? Let’s help your venture shine!
1. Why you’re passionate about what you do
Notice that this isn’t *if* you’re passionate — you have to have a fire in your belly to be a successful entrepreneur. And no investor wants to work with someone who is indifferent about their own venture. Remember, it’s like dating: Are you attracted to the lump or the person who is jazzed about what they’re doing?
So you’re passionate. Can you explain why?
Ideally, this is something you worked through as part of preparing your business plan. And it should be short. Consider:
- Rosana Polanco has started three businesses because she’s passionate about showing her daughters that entrepreneurship can empower them to shape their own futures.
- Jeff Dutzel owns Dutzel’s Catering & Events, but food isn’t his obsession. “People always say I must have a passion for cooking,” he says. “But I have a passion for smart business.”
- Erik and Paley Carmona were enthusiastic about perfecting a recipe for chamoy and sharing the Mexican treat with friends. That excitement turned into a business, Carmona’s Chamoy.
Maybe you love animal rescue and pouring a mean latte, so a cat café is the obvious next step. Or you created a widget that can fix a problem that impacts people you care about. Whatever your “why,” practice explaining it in just a few sentences.
Resources to help you understand and articulate your “why”:
- Author Simon Sinek identified the concept of “Why?” Read his exploration of it here.
- Classes like Pitching to Investors from Missouri Small Business Development Center (SBDC) at UMKC can help you streamline your talking points.
- Learn from Kansas City entrepreneurs who have pitched successfully. Here are their top 15 tips.
2. How you are personally diligent and confident
Even if you have the best idea in the world, investors are going to think twice if you, personally, are a hot mess.
In his SCORE Kansas City presentation, “Small Business Funding – How to Find Investors for Your Business,” coach Allen Clary stresses the importance of how entrepreneurs make funders feel.
“You can win in the investor game, even if you are a little disadvantaged on the other factors, if you make people feel good,” Allen says. “You’re checking a lot of boxes here from an investor perspective, but do we think, ‘This is a good person?’ Do we think, ‘This is a solid person with a lot of integrity, with ethics and honesty?’ And, ‘Are they reliable?’ That’s the kind of feeling you want to project. It’s how they feel about you and what you’re doing.”
Be prepared to talk about all the work you’ve done so far on your business. This includes discussion of your business plan, current financials and projected activity. Practice talking about your venture in a way that conveys your knowledge and confidence. And don’t feel bad if you need some coaching and practice — this is a skill that often takes time to develop.
Resources to help you understand your business and present yourself well:
- Work with a business consultant. Many organizations in the KC metro offer free coaching on presenting yourself and your business. These include:
- Visit with other entrepreneurs and hear how your fellow founders talk about their businesses at 1 Million Cups. The Q&A and feedback components of these weekly gatherings are incredibly informative.
3. What they stand to gain from an investment
Founders are often told to think like a customer. But it’s important to think like an investor, too.
“Investors need you,” Allen says. “They don’t like keeping their excess capital in cash. They want that money to work for them.”
The average investor puts most of their money into stable investments, but they want some of their funds to go into high-risk investments that have the opportunity for great success. That’s you and your business.
“Almost any high net worth individual or investment group wants to take bets on people who are out there trying to create something very special and who will return an outsized return to them,” Allen says.
Your venture comes with a considerable risk, but also the chance of a healthy return on investment. So, show potential investors what their involvement can get them both monetarily and personally.
This is where thoughtful, well-researched financial projections come in. Show milestones, revenue and pilot projects. Be prepared with numbers to back discussions on return on investment (ROI). But also consider the bigger picture.
Maybe working with you can help an investor enter a new market. Perhaps it will introduce them to leaders in the industry. Or maybe your new technology could open new worlds for both of you. Whatever these opportunities are, identify them. Show prospective investors what they stand to gain.
Resources that can help you pinpoint and articulate what funders can gain from an investment:
- Digital Sandbox KC provides proof-of-concept resources. Pitching to the advisory group to apply to the program provides feedback, links to industry and suggestions on funding options. Get the inside scoop on how to pitch.
- Harvard Business Review: How Venture Capitalists Really Assess a Pitch
- Cameron and Tameisha Martin of Love Is Key Food and Dessert Innovation turned to a familiar source for help communicating with investors. “We watched ‘Shark Tank’ to learn how to pitch,” Tamesha says.
Other programs that can help move your small business to the next level
We’ve said it before, and we’ll say it again: Kansas City is amazing. Our entrepreneurial ecosystem is chock full of people and programs ready to provide free or low-cost guidance as you launch and grow your business.
Get started with the KCSourceLink Resource Navigator, our directory of 230+ nonprofit Resource Partners. And our comprehensive calendar of small biz-centric classes and events can get you moving, too. Need a little direction? Our friendly Network Navigators can create a FREE Personal Action Plan that’s an individualized to-do list of business owner awesomeness.
Looking for more entrepreneurial inspiration? Check out how other Kansas Citians have positioned themselves for business success:
