How to Attract Investors for Your Business Using Just an MVP?
Every day we witness the rise of new startups. Many of them are bursting with ideas that they want to be shared with the world, but they are often denied the chance to connect with their target audience due to insufficient money.
Likely, you do not want to be a part of the path of failed businesses; no one does. If you’re looking to secure an investor to fund your venture check out our advice below to help you reach out to investors and get funding.
1. Check Your Business Idea by using an MVP
An MVP, also known as a viable initial product, is a concept that sprung from Eric Ries’ book Lean Startup. Lean Startup shifted the whole startup business through the introduction of a revolutionary scientific method for building goods and providing services.
According to Ries, startups operate under high-risk conditions, so they’re unable to anticipate every detail. To deal with uncertainty, startups should stick to a “Build-Measure-Learn” cycle that involves the rapid building of a minimum viable product, testing that product with the target audience, and making conclusions based on that research.
The simple “Build-Measure-Learn” method has been adopted by many successful startups including Mint, a financial management software company. Mint’s founder, Aaron Patzer, describes his experience in building the company:
When I began Mint I decided to take a different approach…and that’s the method that I came up with (Validate your idea > Develop an initial prototype > Create the right team and raise money). The first step is to prove your idea. I didn’t write a single line of code till I had done around the equivalent of three to four months of thinking about Mint which I believe is in contrast to what most people suggest…The next step was to design an initial prototype, then form the appropriate team, and finally, find the money.
Mint’s success shows that investors will be more inclined to approve the idea of a start-up backed not only by a business strategy but also by evidence-based data.
To test your startup idea effectively, solicit the feedback of your customers to determine what they want from you rather than what you believe they’d like. If your customers dislike your product, it’s an opportunity to improve in the beginning and develop a product that meets the needs of your customers.
If you think your idea for a startup isn’t feasible then it’s sensible to change the entire idea. Micah Rosenbloom, a venture partner at Founder Collective, points out that you should look at the necessary elements of this change to ensure that you are aware of what needs to be altered within your product, whether it’s a specific feature or a complete overhaul.
2. Make a Business Plan
If you’re funded by a bank or investor, both require a business plan. A business plan provides essential details regarding your business (for instance, what kinds of services or products you provide and the market segments you’re looking to target) and goals you wish to attain, and how you’ll reach these objectives (a marketing strategy as well as a strategy for operations). However, some entrepreneurs think that writing a business plan is tedious or unimportant but there are some reasons to write an effective business plan.
Organize your business idea and determine the steps you must take to reach your objectives.
Identify what your weaknesses and strengths are, and examine the risks and constraints that could hinder the success you desire.
To track the progress of the project’s implementation A business plan provides the details of the project’s goals as well as the funding needed for a company and more.
To establish the requirements for team members, recruit individuals with the appropriate skills, and then estimate the salary.
You can pitch your idea to bankers or investors with a well-organized document.
Let’s examine the components you should incorporate in your plan for business:
1. SWOT Analysis
A SWOT analysis identifies strengths and weaknesses, opportunities, and threats to your business. A SWOT analysis will help to improve your business and marketing strategies.
The majority of the time the SWOT analysis is usually drawn as a table that is divided into four parts. To complete each of these sections with accurate and pertinent answers, consider several questions that stimulate your mind. While these questions might be different for each type of company but there are common ones that are asked by people in SWOT analyses.
2. Analyzing Competitors
Analyzing competitors can be done in conjunction with a SWOT assessment or at the beginning of your business plan. The information that is gathered as the results of your competitor study is used to decide on the marketing strategy you will use.
Here’s how to analyze competitors:
- Find your direct competitors – businesses that provide the same service or product as you do, and indirect competitors. Indirect competitors may be foreign businesses, companies offering similar products or services, and businesses challenging you in certain circumstances (economic or political shifts, changing trends, etc.).
- Create a competitor product summary. Examine the products of your competition from the perspective of values as well as features, strengths, and weaknesses. Important aspects to be considered are the service and product offerings price, as well as the channels for sales.
- Review marketing profiles. A marketing profile will include an analysis of your competitor’s market share of their company, as well as marketing strategies. A typical analysis of a marketing profile is a study of SEO structure as well as social media and content (blog videos, post whitepapers, case studies, and more).
3. Study your market for Your Business
Learn about the market you’ll join. Take a look at the industry you’re likely to be working in. Give information about how big the market the growth and trends and what you anticipate from customers.
Choose a market to target and investigate its growth and potential Don’t attempt to cover the most markets you can. Then, identify your target customers (for instance demographics) and then demonstrate that your product meets the needs of your potential customers.
Also, provide information about the pricing, gross margins, and other promotions (such as sales or discounts) that you plan to provide. Give a brief overview of the pricing structure that will give you competitive advantages.
4. Map Out a Marketing Strategy
Marketing strategies, also known as a marketing plan, define the way you’ll get into the market (for instance, eliminating your competition) How you’ll get awareness about your goods or products and (on Twitter, Facebook, and Product Hunt, for instance) and what tools you’ll utilize for those goals.
5. Make an Operating Plan
When you write your operational plan it is essential to outline the steps you will take to make your item or service for the market. Operating plans vary for each type of business, but there are common elements to include in each operational section, like employees (number of employees required and their expertise, the levels of engagement, the details of contract agreements with employees, and so on) and facilities (all your assets, including your inventory and buildings) equipment, procedures (steps for creating your product or offering the services you offer).
6. Create a Financial Plan
If you’re going to get business financing from business angels, venture capitalists as well as banks, financial supporters will be interested in viewing how you plan to finance your business. A financial plan covers three main areas:
- A sales forecast
- A cash flow projection
- A balance sheet
In a sales projection, you present your sales, expenses as well as profits over a particular period (for instance either on a monthly or quarterly basis). In general, people in business offer detailed information on every aspect. For example, the expenses section could include information on rentals, wages, materials, and so on. On the web, you will get a variety of pre-made sales forecast templates you can customize to suit your requirements.
You should indicate how you anticipate the money to be used or accumulated in your cash flow projection. Most businesspeople use previous data such as the number of profits and losses in the previous years to formulate assumptions regarding cash flow. But, if this data isn’t readily available, you can make use of software for managing cash flow like Quickbooks and The Float that can calculate and predict your cash flow effortlessly.
In an account of your balance sheets, you show three figures that include assets (the financial value of any objects you own) as well as liabilities (your obligations), and equity (assets plus liabilities).
3. Make a Great Team
While MVP is a well-known buzzword in the world of startups but the concept of MVT – minimal viable team, isn’t nearly as widely used. We’ve discussed an effective business plan as well as a minimal viable business as the factors which influence the decision of an investor to finance your venture.
A strong team plays a significant role in an investor’s decision-making well. When we say a great team, we refer to a team of experts – a team that creates a positive impression and can win the favor of an investor.
Cohesiveness is the most important factor that distinguishes a startup group from a well-established business group. Based on Kindred Greer who has studied the behaviors of teams in the early stages the members of these teams are virtually “married” to each other They’re committed and passionate about working together towards a common purpose.
To ensure you have the best people to join your team, be sure to ask yourself a few questions, such as:
- Does this candidate align with my idea of the product?
- Do our core values like integrity and honesty, match?
- Does this person exhibit the traits I’m looking for in individuals?
- Are they flexible enough to adapt to sudden changes, which often happen in new businesses?
- Does the candidate demonstrate sufficient commitment to the position? Do you think there’s a chance the candidate will be let go when there is a more appealing opportunity?
Keep in mind that personality is a crucial element to be considered when creating a startup team Although professional abilities can be improved or acquired, attitudes and mental states cannot change.
3. How to Find Investors for Your Startup
After you’ve created an MVP, created an outline of your business plan, and put together a team now is the time to begin searching for investors who can aid in the longevity of your company. Finding the right investor who can complement your team, coach you, and provide you with invaluable advice is as crucial as improving your pitch deck.
One of the most common mistakes made by startups is pitching their business to investors from all sectors without taking into consideration important aspects such as the type of business investors favor. Richard Harroch, an entrepreneur and investor says it’s crucial to do your research before presenting your idea to investors.
When researching investors, you should consider areas like industries they specialized in, their history (companies that they have invested in) as well as the amount of money they invest in, locations where they’ve made investments, relationships, and interests. Through this investigation, you’ll be able to identify your Mr. Right – an investor who will have more in common than the possibility of a loan.
Once you’ve narrowed down your list of investors that you’ll pitch, think about how you’ll approach them.
Where can I find Business Investors?
- Online platforms. These platforms bring investors and entrepreneurs together under one roof. The advantage of these platforms is that you can deal with a minimum of documents. Most of the time, you’re just required to design a stunning profile of your project and then submit it to a webmaster. If a startup is successful in winning an investor’s favor, the deal can be closed offline. In general, platforms charge between 5 and 10 percent per deal. Examples of online platforms that facilitate matchmaking with investors are AngelList, F6s, 500 Startups, and Gust.
- Investor lists. Investor lists are available on sites such as Forbes, Business Insider, CrunchBase as well as Angel List. They generally, however, have lists that include important details like the background of investors as well as the cities they’re situated in, their most recent investments, and social media profiles. With this information, it is possible to tailor your pitch to the person you’re hoping to approach.
- Meetings and conferences. Investors are often part of communities where they can share their experiences and best investment methods. Richard Harroch mentions that investors frequently rely on their friends and acquaintances to get an opinion about whether to invest. So, attending meetings and conferences is a must. At these events, you will be able to meet with investors (or someone who could meet the investor) in a comfortable setting as well as network and make contacts. You should consider attending events every year which bring together angel investors, venture capitalists, and startups from across the globe like AngelSummit.io, Webit Festival Europe, and SVOD.
4. How can you better appeal to Investors
Investors are different from ordinary people who make choices based on insight and feelings. Therefore, it’s crucial to establish your credibility at the first point of contact whether that’s through the form of a PowerPoint presentation or a meeting in person. To make sure you are appealing to investors, you should follow these guidelines below:
- Don’t just submit an idea for a business plan: A common and disappointing proposal you can present is sending a 50-page business proposal and hoping that you will be selected for investment. Experienced investors suggest providing a summary of your company’s operations as well as a short, concise presentation that includes 10-15 slides. Tim Berry, an American businessman, suggests that you must prepare your business plan well-organized and boldly with elements such as lists, bullet points, and tables.
- Be proud of your teamwork: It’s no secret that your team is the one thing investors are paying attention to in the beginning. Investors want to ensure that you’re professional as well as an excellent team player Don’t overlook mentioning your team member’s abilities, knowledge as well as their motivations, and participation in the business. In a face-to-face pitch, investors will prefer that the entire team speak instead of just the CEO.
- Include a financial forecast: Some companies don’t provide an accurate sales forecast or just don’t include it as part of their plans for the business. Barry Kumarappan, director at Secerno Real Estate, advises you to “live” the figures you have included on your company plan so that you can predict the financial risks and dynamics.
- Make use of the potential of social media: Making contact with investors is more straightforward with a referrer – someone who will introduce you to an investor. Explore your existing networks of friends, family members colleagues, friends, and anyone who you’ve dealt with. Often, you’re far closer to the investor than you think! Make sure you’re improving your social media presence. make consistent, professional profiles that reflect your company and experience. Websites such as LinkedIn, Twitter, Facebook, and Google+ provide quality social networking and sharing of content that strengthens your online profile.
- Develop a highly effective pitch: A successful pitch must be individualized. Take into account the information you gathered in your research on investors when you write the pitch deck. Make sure to address investors with their names and include a short note explaining why you’re writing to them, as well as an encapsulated story of your business. Tim Berry says the following: “Tell us a good story that we can trust. Don’t make us believe that your company can change the game instead let us absorb your story and make a decision for us.”
If you’ve learned some strategies to contact investors and present a winning pitch, be prepared to be rejected or ignored. This is a reality for every startup goes through. Utilize simple follow-up strategies to keep in contact with investors. For instance to share newsworthy successes of your company. A professional, unobtrusive follow-up will always be valued.