A start up thrives on only few things, a fantastic idea, a gutsy team and investors. Each of the three are challenges by themselves. But the most obstinate hurdle is raising funds for your startup, starting with how you approach an investor.
A start up thrives on only few things, a fantastic idea, a gutsy team and investors. Each of the three are challenges by themselves. But the most obstinate hurdle is raising funds for your startup.
Asking anyone for money is difficult, and asking someone to invest in your baby in exchange of equity is equally difficult with multiple factors involved. Starting with how you approach an investor.
First impression
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Every investor is sought after by a large number of startups. And there is a strong likelihood that you may get your first chance to talk to your investor at a party, in an elevator, or between conversations amongst acquaintances. You need to convert this first chance into the next. So be prepared. Have an ‘elevator pitch’ ready, which summarizes your proposal within a minute. Make sure your pitch gets the listener to care, explain what your company has to offer and answer the hidden question, “what can you do for me”. Make it irresistible! (If you’re looking for an example, we have one near the end).
Credentials and traction matter, if you’ve worked with big brands earlier, mention their names even if it is the investor’s competition. This shows you are gutsy and doing something right. Remember, it’s an elevator pitch, so give them enough to get attracted but not enough to think that they’ve heard it all. Finally leave them with a call to action…a meeting, a phone call?
The Right Road
If you’ve only had a chance to somehow reach your proposal file to the investor, it is going to just lay there like many others. An investor is going to look at your proposal only when someone close to them suggests that you have an idea worth looking at. So find that reference that can take you right to the office of the CEO.
Finding the Investor
Before you get a chance to pitch to them or define the right approach to them, you need to find an investor. For this study relevant investors, don’t go running after everyone.
It is not just about the industry, it is also about the ticket size.
And the way investors perceive risk and return. For instance an early stage or seed investor takes more risk and thus would expect a higher return.
Once you have identified the investors, networking is key to reach them. Connect with common contacts via LinkedIn, attend social functions and talks where you might meet more people from the same circle.
Unless you have an idea that is the next Google, chances are less that the investor is going to meet you right away for a pitch. So do the groundwork, ask people who can to introduce you or write an email introducing yourself.
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Writing the Email
Most investors do not have the time to read lengthy material. They want crisp, to the point material. Here are some pointers to an attention catching email:
1. A sharp and clear subject line that gets them to open the email
- BrightLight.com, Founded by Ex-Yelp CMO
- Friend of ABC of xyz.com (where ABC is a common connection and xyz.com is known to the investor)
2. Form a personal connect: start by saying that you had a chance to hear them at a certain event, or follow their blog, etc. Be honest about this but don’t go for flattery.
3. The why statement: The why statement summarizes what you are doing and why. Don’t lay it out there blatantly, instead address the problem and offer the solution via your product. Say the next steps you want to achieve with your business. This is an extension of the elevator pitch.
4. Traction: Bring out the big guns. Talk about the people you’ve worked with or are working with. Investors believe in momentum and traction is the best way of letting them know how your business is growing. Simple figures like key hires, traffic to website, strategic partnerships and demand can also help establish the needed.
5. Talk about the Team: Knowing the team helps build trust. Credibility of your team relaxes the investor and establishes faith in the product.
6. What Do You Want: Keep the Ask for the end. Clearly state what you need: How much are you raising, which funding stage are you at and a call to action. For instance, We’re raising Rs.18 crores in start-up stage and would like to discuss with you, if next week suits you.
These are the tried and tested methods of attracting and approaching your investor. But if you’re not up for these, you can always try what Baydin’s co-founder and CEO Alex Moore did – he caught a tweet from McClure whom he’d been trying to meet for a month, asking for a ride. Moore drove down immediately and pitched to him all along the 40-minute ride!
Sample Pitch:
Here's what Zomato covers in their elevator pitch, as shared by their CEO, Kimberly Hurd with Table Crowd:
"Zomato helps anyone who loves food and drink to never say ‘the usual’ again.
We are the go-to source for restaurant information and help people make smart and personalised decisions for whatever type of eating or drinking experience they are in the mood for. In London alone, we list in-depth information for over 20,000 restaurants ranging from menus, photos, ratings and reviews to over 30 other details like the modes of payment they accept and opening times.
For instance, we are the only way to find a restaurant open at 7am, which is dog friendly, serves ginger ice cream, has outdoor seating, and takes credit cards.
Whether you are looking for a local kebab shop for a quick takeaway or the most recent Michelin starred restaurant for a special evening, you’ll find it on Zomato."
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