Investors usually either sell their shares in a successful startup or retain them for a stable passive income. The parties stipulate the division of profits in advance. In this case, the investor’s share sometimes makes up the majority of income, while the founder’s share does not exceed 10%.
In order to find a good project to invest in, an investor needs to do serious work. It includes not only searching for and obtaining information on startups, but also building their own image in the eyes of the authors of the ideas.
Five steps to building the right investment strategy:
- Engage in networking and build trust in the startup community;
- get to know the authors of the projects and follow their activities;
- learn to follow trends and understand at what moment and what idea will work;
- find experienced co-investors to invest in projects together;
- Evaluate the project at each stage of its development, in order to make a decision on further investments.
Before attracting investment, it is necessary to determine the ultimate goal of financing and, depending on it, calculate the amount of investment, sources and timing of their receipt.
After that, it is necessary to determine the investors. If you cannot or do not want to raise money from your inner circle, you need to make a list of funds or business angels that are suitable for the purpose of the project. Funds can be found in the business media or in the profile channels of messengers. Investors can be contacted on LinkedIn, with warm letters prepared in advance with the necessary information. Dating can also be used to get a face-to-face meeting.
When communicating with an investor in person, it is important to get him interested right away. This requires an attractive business plan, as well as a concise and clear presentation or pitch. The advantages over competitors and the uniqueness of your idea should be stated at the beginning. It is also necessary to indicate the clear tangible benefits and expected results. For this purpose, the statistics of the prototype test or any other, which justifies the need for this product or service, is suitable.
A brief outline of the pitch:
- A description of the problem and its solution;
- Project stage, metrics and achievements;
- business model;
- stages of development and what has already been done;
- market and competitors;
- team;
- investment proposal.
In order for the presentation to be successful, you must learn to speak to the investor in the same language – briefly and concisely. You need to be prepared for all possible objections from his side.