8 Ways To Make Your Business/Startup More Attractive To Buyers & Investors
Our network of venture capitalists and angel investors always tell us that the difference between a startup that is capable of raising funds and one that is not; is always evident. You must constantly think big if your business is serious and wants to scale and grow. If money helps solve the problems preventing your business from growing, you’re in an excellent position to start preparing yourself for outside investments. While it’s always advisable to start small and then grow, there comes a time when you will need funding to scale. A common mistake by most entrepreneurs is that they focus too heavily on the product rather than plans to scale and customer needs.
Raising money for your startup is no picnic, especially during current global market conditions. In a recent CB Insights report, international funding for startups fell by 23% in Q2 of 2022 from the first quarter in MENA, marking the most significant quarterly drop in deals in a decade. The challenging market conditions make it vital for your startup to be appropriately suited and prepared to become a fundable business.
You need to keep in mind that an investor looks at your business differently than you or your employees or customers would. How you are seen in the public eye, news outlets, or the PR around you is not the lens that an investor will solely use to evaluate your business. Investors are free from emotions in their evaluations and care about if and when a potential trade will generate a positive return.
To answer the question of if and when a potential business will generate a positive return, investors will look at four key elements :
- Planning & Strategy: it’s not enough to have a well-thought-out plan for what you want to achieve within the next five years. You need great clarity in how you will be performing your projections and how you will be spending your request (the ask breakdown, as most investors call it). A business with a detail-oriented strategy on how it will use the money will be more attractive to investors than a business with no absolute clarity on where the money will go.
- Data & Numbers: when Jeff Winer once said, “ Data powers everything that we do.” he was on point in how it translates to business readiness for investing. If your data and numbers are not well mapped and visually clear to understand, you risk coming off as unpragmatic and losing the strategic edge you want to show investors. Data is a massive area of what investors look into when evaluating your business; no one cares about projected subjective numbers; crunch your numbers and crunch them hard before approaching any investor.
- Competitive edge: Investors are always searching for the next best thing. They want to see ideas that will separate, have compelling, unique selling propositions and are not lost in the crowd.
- Team compatibility: Your team is one of the most significant assets investors will evaluate. Some investors will invest more in people than ideas; having a solid and talented diverse team will ensure you capture the investment you need, and it can make or break your ability to find the necessary funds.
Below are some ways you can make yourself and your business more attractive to investors and win them over within all of these four key areas:
1. Choosing the right investor
One of the most important things to remember when preparing your business for investors is to choose the right type of investors; to do so; you need a game plan before approaching these potential investors. If you select multiple investors that are not interested in your product or vertical, you would be burning your chances and wasting precious time.
2. Mind the tunnel vision
Many entrepreneurs fall into the “aha” moment when they think they have stumbled on an idea that will become the next giant unicorn in a few years, and all they see is what they want to see rather than what is happening in the market. Avoid what is known as “Tunnel vision”, being stuck on how great you think your business will be and missing the pitfalls or gaps that investors can point out once you start approaching them.
3. Have proper financial records
The basic notion of why accounting was invented is to help management and investors understand the Company’s financial position and make informed decisions accordingly. Having proper financial records of revenues, costs, capital expenditure, salaries, taxation etc., as well as developing audited financial statements in the form of Incstatementsment, Balance Sheets, and Cash Flow Statement, help assess the accurate valuation of your company and ensure its business continuity. For more information on this area, you can download our e-book (here)
4. Have a clear USP (unique selling proposition)
Your idea may be great, but without a clear and unique selling proposition, it will not stand out to your customer segment or appeal to potential investors. They are not looking for ideas just to generate cash flow; they want to see that you can stand out amongst direct and indirect potential competitors. There are no simple recipes for creating a USP, but below is a great way to start :
We help [target audience/niche] achieve [specific, quantifiable benefit] using [unique mechanism] so that they don’t have to [pain you help them avoid].
You can also download this template from Hubspot to help you visualise and plan how you want to frame your USP.
5. Research investors before meeting them
Most serious investors will want to know how much you have already raised, so it would be wise to have your eye on investors with rapid succession. In addition, you should be smart enough to keep an eye out for investors with an excellent match to what you’re asking for. It’s not just about quantity but quality matches. Researching potential investors is the best way to measure this match. You can do so by reading their blogs/tweets on social media and reaching out to other members in the ecosystem who are in contact with the potential investor you are researching. Do your homework and dig in. Understand what stages these investors are interested in investing within and which verticals they prefer. The more time you spend doing this exercise, the better prepared you will be before meeting a potential investor, you will have a better list of potential investors to approach, and finally, it will give you the chance to create a list of possible questions they will be asking.
6. Make your asks realistic
No investor wants to hear from you if you have unrealistic or poor explanations of asks. Make sure you have clear visuals and content for how you want to present your ask to an investor. You can do so by linking each part of the ask to a specific business goal and linking all these goals to your overall vision. Make your ask cut-throat and unnegotiable as much as possible by doing your internal and external research to understand current and future market trends that can impact your business performance. You should also clearly highlight your ask’s impact on the business and how it will shape future growth plans.
7. Ace your PR game plan and public traffic- branding
You would be highly mistaken to think that potential investors will not be researching your business and brand just as you are studying them. You are having both your personal and business brand covered from a digital and social point of view can make or break your ability to attract and retain investors for your business. A great way to maintain a sustainable competitive advantage in this area is to have an in-house or outsourced team helping you with your PR & media coverage. Depending on the vertical you work in, you should be able to determine the frequency, which type of content and time frames would be best suited to achieve the best possible results.
8. Have a story and make it good
Have a story and make it good
Do not underestimate the power of a good story. Storytelling can help you translate your business ask and your success progress to investors clearly and captivatingly. Your ability to have a story behind your business will give it an edge that is attractive to your market and potential investors. Whether you are comfortable with storytelling or not, we are all storytellers. You don’t have to be great at it and don’t have to like it, but you have to get it done. Nothing will beat a good story that taps into emotions when talking about your business. Storytelling for startups is essential to your marketing strategy as an entrepreneur. To learn more about this specific point, keep watch for our upcoming podcast and article on “The power of Storytelling for Startups”.
To sum up, you need to have all your cards ready before approaching potential investors, don’t take a blind leap of faith in this account; instead, have all your homework ready from all aspects of your business. Your pitch, its content, who you will be approaching, when you will be approaching them and how; can all impact the outcomes of your ability as a business to win over and keep investors interested in your industry. Take your time in the preparation phase and give yourself ample trials before the real deal; speak to trusted mentors and advisors to get all the needed feedback about your story and pitch. Finally, remember that if one investor or more is not buying your pitch, it certainly does not mean you don’t have a viable and high-potential business. It means you must keep adjusting and perfecting your story; the right investor will soon come to buy in.
It’s crucial that all startups understand the M&A scene and how they can be better prepared for its opportunities. Here is a guide to help startups achieve just that!