Step 1. Decide if you need an investor now
Before embarking on a search for investors, honestly answer yourself the question: is it really necessary for you now?
Searching is labor-intensive and time-consuming. In addition, you must “burn”, believe – a significant portion of the emotional component is needed.
In principle, a business can grow without investment, it will just be more systematic and slow growth. In my opinion, investment is more a matter of ambition and speed.
Of course, investments financially help to make a significant leap and move to a new level in a short time, this is their main function.
there are a number of advantages that are not obvious at first glance, but can have an impact on the development of the company.
- First, it is expertise.
When communicating with investors, you get feedback on the work of your company, on the business model in general, and with the right attitude, a lot can be learned from this communication to improve processes and development.
- Second, public approval.
When your clients see that they are investing in a company, they begin to trust you more, and the company’s social rating grows.
In 2019, we founded the Pointer company, investing our own funds. We understood that for growth we need investments, and I decided to figure out on my own how to prepare a startup to communicate with investors.
Step 2. Create a roadmap
Now there are quite a few courses that provide basic information about the terms, criteria and logic of the investor search process.
another option is an accelerator. You have a cool idea, and when you get into the accelerator, after 3 months you come out with a full baggage of knowledge and understanding of where to go and where to look for investors. And, perhaps, already with the first term sheets.
Cover photo: Life and Times /
Step 3. Prepare your startup for launch
Investors want to make money. And a startup must show that in two years it can grow by five times, and in 5-7 years – 20 times, and bring a good return on investment.
You must have high-quality calculations and transparent logic, you must understand the size of the market, your competitors, potential customers, have a growth forecast and similar information.
Collect all the data, analyze your competitors, build a forecast. It will take a long time, but you shouldn’t rush: the information should be clear, based on numbers, and not on your dreams.
By the way, investors are not always interested only in profit. For example, if you plan to apply to corporate funds, slightly different criteria become important.
Here the main goal will be to create a product that provides synergy for the corporation. And in this case, you need to look for funds that fit your segment and business specifics, and analyze the possibilities of your startup to cover their needs.
Step 4. Make a list and write to everyone
At first it seems that there are a lot of investment funds. But when you start researching this topic, you very quickly realize that there are not so many investors and business angels in your topic and your type of business.
We had a list of about 50 items. You write to all of them, start communicating and gradually go to the presentation of the project.
We were looking for our first investor for a pre-seed round for about 3 months and went to one of the funds included in the TilTech investment group.
It did not work out with them to close the round, but they recommended us to the ISLA fund, with which we eventually closed the deal.
In the process, I pitched in thematic telegram channels, sent out cold letters. And this gave a result in an unexpected way – all three funds eventually contacted me themselves, saying that someone had heard about us and said that we were looking for investments.
- The first and very common mistake – the confidence that your idea is cool in itself. This is understandable: you created this company, you believe in its future, you are delighted with your idea, and it is really brilliant.
But investors are more pragmatic – they want to make money. Therefore, talking about yourself, you must not forget about the main thing for them. Your task is to visually and clearly show how an investor can make money on your cool product.
- Second mistake – this is a refusal to admit their mistakes. The first 5-10 conversations with investors are always difficult. Listening to and receiving feedback is important because it will really help you improve and refine your product in a way that makes it interesting to investors.
- Third mistake – this is the involvement of a specialist from outside. It is important that in the pre-seed and seed rounds they invest in you; exclusively personal interaction works here. You should not trust the agent to communicate with investors; it must be either CeO or someone from the founding team. It is unlikely that someone will buy a startup through a presentation or through a third party.
Personal experience: the beginning of a long journey
When Pointer received its first investment in January 2020, we had no idea how timely it would be. Suddenly, in March 2020, the whole country was in strict quarantine, it was not clear how the business would continue to work and what would happen.
The investments helped our company overcome the money gap and even doubled its growth during the crisis year.
During 2020, we informed all investors we spoke to prior to the first round of our news. Once every three months, sometimes every six months, I contacted them and talked about the company’s success.
We had good growth, and we understood that we wanted and could develop much faster, and this requires investments. As a result of this communication, one of the investors became interested, and we began negotiations on a new round.
In August 2021, we closed a deal for 40 million rubles with the QVentures fund. By this time, the assessment of our company had almost quadrupled. We got funds for development, we also got the opportunity to develop joint projects with the foundation.
In November, we launched a new feature for small businesses, the Feedback Activator. There are plans for several more new products and expansion of the client base. It’s only begining!
Hear horror stories about bloodthirsty investors and don’t be afraid to look for investments. From our experience, we have made sure that there are investors and are ready to work with startups on terms that are adequate for both parties.
Remember that not only an investor chooses you, but you also choose an investor – an important partner for the long term. And you should be comfortable communicating with him.
There may be many difficult moments ahead, you will have to solve difficult issues, the investor may not like something, or you will have to ask for additional investments.
It is extremely important here that you can build an open dialogue, you must have good contact. Believe in yourself, in your product, and you will succeed!
Source: RB.RU by rb.ru.
*The article has been translated based on the content of RB.RU by rb.ru. If there is any problem regarding the content, copyright, please leave a report below the article. We will try to process as quickly as possible to protect the rights of the author. Thank you very much!
*We just want readers to access information more quickly and easily with other multilingual content, instead of information only available in a certain language.
*We always respect the copyright of the content of the author and always include the original link of the source article.If the author disagrees, just leave the report below the article, the article will be edited or deleted at the request of the author. Thanks very much! Best regards!