In your mission to secure finance, it is unsurprising that you need to find ways to persuade investors that you are worth committing to over the countless other business pitches they hear. This means piquing their interest with the right information and insight into your venture.
When considering different enterprises as investment opportunities, there are certain criteria investors want to meet. While the exact recipe for success may vary from investor to investor, understanding the common elements they are looking for will help you optimise your funding pitch. Using this, you will be better equipped to prove your business’s value and obtain the investment you need to achieve your ambitions.
In this blog, we have outlined the top eight things an investor is looking for in your business and how you can provide them.
- A promising value proposition
- An effective business model
- Financial understanding
- The potential for growth
- A strong leadership team
- Investment readiness
- Passion and insight
- Return on investment
A promising value proposition
The value proposition behind your business is significant. It is among the first things you should tell someone to help them understand your idea, tying together your business goals, purpose and vision. On top of this, it highlights how you are offering value to the world through your enterprise, which is precisely what investors what to know.
Early on in your funding pitch, you should outline the value proposition and emphasise the benefits you will be offering and how this will generate demand. Examples could include filling a gap in the market, improving services in a specific area, and solving your customers’ problems.
Your business’s value to its target customers should be clearly demonstrated, as this will show how you will drive sales and profit. However, you should also consider the value offered to employees, partners, the wider community and, critically, investors. This will enable you to pinpoint the different benefits of your venture, provide a full picture of your worth and ensure investor buy-in.
You should also create a value proposition that is good for the long-term. If it is built on a trend or fad that may disappear in a few years’ time, it may flag to investors that your idea is not one of longevity and deter them from sinking their money into it.
An effective business model
Next, you need to showcase a robust business model. This matters to investors because it dictates how your business will operate, in line with your value proposition, and whether you have the right tools to meet output.
Many elements fall under the ‘business model’, including operational strategies (how you will meet demand), sales and marketing strategies (how you will generate sales) and pricing and finances (how you will fund your business over time). The model will also determine how you expect your business to change over time as revenue grows.
Investors want to see a profitable business model by generating demand and adequately serving customers and scalable, allowing you to achieve growth in line with increasing revenue. Most importantly, the model needs to make sense – with sensible strategies that will meet your output goals and enable you to have a fully operational enterprise.
By showing the above features in your model, you will bring investors on board in the knowledge that your idea can work in the real world and offer them increased returns as your business grows.
It is critical to demonstrate robust financial understanding at every stage, including within the business model and in your growth plans. You will also need to include a specific finance section in your pitch, using financial forecasts.
Having financial understanding matters for two reasons. Firstly, it shows that you know how your business will operate, with a real handle on outgoing costs with income and growth plans aligned to revenue. Secondly, it assures investors that you will handle their money appropriately, with the ultimate aim of turning it into profit for both yourself and your investors.
When discussing the finances, it is critical to be accurate and realistic, ideally using data from your business or the market to support your projections and state your assumptions. Consider items such as your outgoing costs, sales, revenue and profit and how they will change over time. You should also incorporate any external funding you intend to use and the impact this will have.
Remember to focus on how your finances will enable your business to run smoothly and successfully in the long-term and how it will culminate in a return on investment. This will allow investors to see the financial opportunity available to them and give them the confidence in their investment.
The potential for growth
We’ve already touched upon the need for scalability in your business model, but it is essential to highlight this point when appealing to investors. Growth usually signals two things: success and profitability. This, in turn, leads to significant returns on investment, so it is no surprise that investors want to see growth potential.
Growth applies to your venture’s capacity to scale up (as per your business model) and the opportunity for growth available. This boils down to your value proposition and target market, so you need to ensure you have an idea that can generate demand over time, take up market share and outshine your competitors. This will help you to convince investors of growing sales, revenue and profit that they can reap the rewards of later down the line.
A strong leadership team
Investors want to see information about the people behind your business. This will naturally mean you but will also include other members of your management and executive teams. You need to convince them that your company has a strong leadership team at the helm with the capacity to navigate their way to success.
Key members of your team should be present at the funding pitch with you, but even if they are not, it is worth providing information about them to investors. This could include their role within your business, relevant skills and any experience that signals their ability.
It may also help to give a narrative about the team. For example, if there is a captivating story behind how your idea was formed, such as between friends, presenting this to investors will help them learn more about you and your vision and engage them with your mission.
Even before you have secured investment, you need to show investment readiness. This indicates that you are ready to commit to an investment opportunity and use the funding to accelerate your goals.
Investment readiness will be demonstrated by your growth plans, business model and finances. Essentially, you want to show you have the understanding and tools you need to scale up your business or begin turning MVP into reality immediately. You should tell the investors your expected timeline and any work you have already done, such as preparing letters of intent, contracts agreed, etc.
Investors will want to see returns as quickly as possible, so by showing you are proactive, you will convince them that you are ready to use their money effectively and start delivering results. It will also minimise the risk of road-bumps in the investment partnership, showing you have already considered the impact of investment and how it will work in your operations.
Passion and insight
Two of the leading characteristics an entrepreneur should have is passion and insight. Passion suggests you believe in your idea and worth, with the drive to push it until you reach your goals. Insight shows that you understand your business enough to charter it down the right course, including its customers and market.
By embodying these traits in your funding pitch, you can maximise investor confidence that you are the person who will turn their investment into a profitable venture. If they see that you have expertise and ambition, it will likely make them more engaged with you as a person – and, in turn, this will make them better invested in your business.
If you don’t seem excited or confident by your idea, why should an investor be? So, don’t be afraid to show how much you believe in your venture and its success while ensuring that belief is founded in careful research, market data and operational sense.
Return on investment
Finally, one of the most vital things you need to assure an investor is that they will receive a return on investment. ROI is why every investor does what they do – and a business that does not look to be profitable stands very little chance of securing funding.
At every stage of your pitch, be sure to draw attention to your ROI. You need to have more than a great idea that generates sales, but a business model that allows effective output, the tool to facilitate success (such as your leadership team) and the real growth potential. By showcasing all of this, you have a powerful argument that your business will offer a healthy ROI.
By convincing them of your potential ROI, you will ensure you succeed in your funding mission.
Securing investment for your business idea is no small feat – but understanding it through the eyes of an investor will make the battle much more effortless.
By considering these eight factors that an investor is actively seeking in a business, you will determine how you can address them, identify your value, and convince investors of your worth. With this, you increase your chances of success exponentially.
If you need help in getting your business ready for investment, we are here to support you. Our start-up and growth services aim to equip you with the tools you need to ensure buy-in, including efficient business plans and engaging presentations. We can also put you in touch with relevant contacts on your funding journey.
Get in touch today to find out more.