November 27, 2017
For any startup, funding is crucial.
While there’s loads of information on the internet on how to attract investors, not much has been said on how to ensure that the financial deal you are signing up, or the investor you are partnering with, will be beneficial for your business in the long run.
So, let’s see what steps you need to take as an entrepreneur to ensure that your startup lands the right investment deal.
Pitch Your Business, Not Product
You have an innovative product. Good! It can attain mass adoption. Great! But investors are more interested in knowing your plan to execute the business around that product idea. A mature investor knows that once an idea is out, it wouldn’t be long before several copycats would start appearing. And if you don’t seem to have a vision or a well-planned business execution strategy, your startup will fail to get some financial backing.
Analyze Investors’ Requirements
Like entrepreneurs, venture capitalists too have certain goals with their investments. Some are there to make profits, while others have bigger goals like enabling a good product for mainstream adoption. As a startup owner, you need to carefully listen & understand investors’ requirements. Not only will it help you decide whether or not to partner with a certain investor, but will also assist in approaching investors in a better way; as per their specific requirements.
Probe Investors about Their Offerings
Remember, investments aren’t just about the money. Usually, under a financing deal, startups also get ideas for better business execution and aid in building a network from investors. So, when approaching investors, be inquisitive and don’t shy away from cross-questioning them on what they would do for your startup. To make sure that you ask the right questions, clearly outline beforehand the needs of your startup and what you expect from investors.
Clarify Legal Aspects before Finalizing Deal
Whatever may be venture capitalists’ long-term goals, they always expect some returns on their investments. And if a startup fails to meet those expectations, consequences can be bad. To make sure your startup doesn’t end up in such a situation, first, don’t promise anything that’s beyond what you can deliver. Secondly, be clear on all the legal terms & conditions of the deal. Also, hire a business attorney to understand everything clearly before moving ahead.
Obviously, to execute above-mentioned tips in the right manner, you would need some first-hand market research to better judge what’s important for your business and what’s not. Only once you have some clarity on that, will you be able to approach investors in a better way and boost your chances of landing a financing deal that is ideal for your startup.
Read more tips on raising capital on TechCo
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