Starting your own business can be terrifying at times, especially once you start actually hiring people. Before that point, it’s an adventure with a bit of scary tossed in, but mostly, it’s about you chasing your dreams. The moment you add your first actual paid employee though, it becomes about something else.
That person…the person you hired, has put her faith and trust in you. She believes in what you’re doing. She bought into your vision for the company and is probably excited about it. She’s also relying on you to make all the right moves to keep the company solvent. Her mortgage depends on it, and that changes the nature of the game for you. That’s why learning how to ask for (and actually get!) money from investors is such a critically important skill!
Let’s go behind the scenes and look at some of the key things investors are looking for. We’ll cover specific questions you might be asked and we’ll tell you the KINDS of things investors will be looking for. The more of these boxes you can check off, and the more of these questions you have solid answers for, the more likely you are to get funded.
Knowing Your Target Market
Don’t fake or fudge these numbers. That is your reality. The real world. The answer is what it is. The bottom line is, the bigger the market you’re chasing, the more likely you are to get funding. If the market you’re pursuing has revenues less than $100 million, you’re going to find slim pickings where investors are concerned. The closer you get to a billion dollar market (or bigger) the easier it will be for you to secure funding for the venture. Market size REALLY matters.
Understanding Your Potential Revenue
Think big. But be realistic. Is there a plan to capture the size of your target market? If you want to expand your business and get to the next level, do you have a plan to increase the revenue to $100 Million? Investors are looking for an eventual payday. You’re not likely to sell shares to the public (IPO) with anything less than $100 million in revenue. If you don’t even have a plan for getting to that point, it’s going to be all but impossible to attract investment money. The better and more realistic your plan is, the better your chances.
Getting Along With Your Partner(s)
If you’re flying solo, this question will obviously not crop up at all. But, if you’ve partnered with someone, this is another point that investors are going to zero in on rather quickly. In brief, it makes them uncomfortable when Mommy and Daddy fight. If your relationship with your partner is solid, and the two of you aren’t prone to having high profile disagreements around the office, you’re in good shape. If your relationship is contentious, you can expect that to make investors nervous.
Your Ability To Hire & Fire
Both of these skills are of vital importance to the future success of your company. Especially in the early days, your ability to attract the “right” talent to get them excited about your vision and to bring them on board is essential. Without that, you may as well forget investor funding altogether. There’s no shame or harm in that, just call your business what it is. It’s either a hobby that takes up a lot of your time, or a small shop, and you’re fine with that. Remember, there are no “wrong” answers where your start-up is concerned. It’s your baby. Grow it in whatever way suits you. But understand that if you want access to other people’s MONEY, then you’re going to need to be able to attract talent to your cause.
On the flip side of that coin, sometimes, no matter how carefully we screen candidates, we make a bad call. It happens. Statistically speaking, it will inevitably happen to you at some point. When it does, you’re going to be tested. Keeping a bad employee around can crush the life out of your tiny operation very quickly. You must be able to act firmly and decisively when it’s time to let an employee go. Investors need to know and understand that you’ve got what it takes to do both.
Running Business in Your Absence
Most entrepreneurs cringe at the very thought of what may or may not be happening on those rare occasions when they’re not directly plugged into the daily happenings at their company. This is, at least to a certain extent, understandable. After all, this is your brainchild. Your baby. The physical manifestation of your dream. It’s a hard thing, but you need to be able to look beyond that to the day when your company can stand on its own, without you or your constant input.
Like children, start-ups need lots of love and attention early on, but the day comes when you have to let them start walking, then running all by themselves. That can cause huge separation anxiety for some entrepreneurs, so start planning for that day sooner, rather than later. In any event, an investor who’s truly interested in your company will probably be curious about both the answer to that question, and your reaction to it.
Telling Your Compelling Story
This is an important subject for a couple of reasons. First, you want to partner with an investor who seems more than dollar signs and who’s genuinely interested in who you are as a company. How you got your start matters, and it’s probably a fairly interesting tale. The more interesting, the better, and when you get an investor asking these types of questions, you know you’ve found a keeper!
It also matters in terms of marketing. These days, especially where internet-based marketing is concerned, your story is one of the key ways you build your brand. Make your story compelling. Again, details matter here, and the more interesting your company’s story, the better off you’ll be in terms of building that all-important brand and getting your message out.
Of course, there are other details that may be required based on the type of your business and situation. At this stage though, if you can answer these questions and can present a robust plan to address these subjects, the chances of securing investor funding for your venture will increase significantly.