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Even with a great business idea, it can be intimidating for first-time entrepreneurs to seek funding, especially if they don’t have any existing connections.
In this curated article, 13 Forbes Finance Council members share tips on winning over potential investors.
- Invest your own money first
Investors want to see that you’re responsible with their money and that you’ll produce a favorable ROI. If you show that you don’t need investors to be successful, they will flock to you.
Jeff Pitta, Medicare Plan Finder
- Do your due diligence
Do your due diligence. Talk to other founders in the investor’s portfolio. It’s critical to know the investor and how they think and behave to ensure they’re an optimal fit.
Anderson Thees, Redpoint Eventures.
- Know your standard startup KPIs
Solve your key performance indicators of the startup before pitching to an investor. They indicate how the business is growing and its current growth state.
- Share your ‘why’
A first-time entrepreneur should focus on convincing the investor of the story behind starting the venture and the vision for its future. Those investing in a new startup often invest in the idea and the people.
Mahati Mukkamala, Piaggio Fast Forward
- Listen and learn
Don’t have an answer for everything.Investors can be a vital source of advice and direction, essentially making an investment that goes beyond capital. Take advantage of their advice, and don’t be too arrogant to listen, learn and adapt.
- Keep your pitch short
You have to be able to express your core business idea in three bullets or 60 seconds. They call it an elevator pitch for a reason. Practice with friends, family, and colleagues until you nail it.
- Build traction before your pitch
Build traction by demonstrating that the business is viable. Create a revenue model, conduct market research, initiate a marketing plan, and show actual, full-price sales. The more evidence you can provide that the venture is sustainable and scalable, the better.
- Have a solid financial forecast
Having a financial forecast gives you two advantages over other startups: It will enable you to refine your overall strategy by understanding your drivers, testing your assumptions, and presenting your vision to your investors with data.
Erica Schoder, R Street Institute
- Know your worth
Before approaching a venture capital firm, have your company’s “pre-money valuation” ready.
- Control the conversation—with humility
Only talk about things you fully understand. There may be things they ask about that you didn’t expect. Acknowledge there is more discussion to be done and be skilled in re-directing towards your bigger picture.
Faith Keith, Leverage Retirement
- Be honest and show your grit
The investors want all the facts. Express your understanding of your competitors and defensibility with honest answers. Don’t ignore the challenges. Show the grit and examples of your drive that got you to this point and how it will make them great return if they back your vision.
Cutler Knupp, The Haskell Company – Dysruptek
- Know your stuff
Seasoned investors hear pitches all day long and can judge who is knowledgeable and confident about their venture. A leader who knows all the ins and outs of their idea will give investors a higher comfort level about investing and the chance of doing so.
Brian Burke, Club Champion LLC
- Have a plan for how you’ll use the money
Have an estimate of how much capital you need and how you intend to use it before engaging investors. Put your best foot forward to lock in the best deal.
About the Expert Panel
Forbes Finance Council is an invitation-only organization for senior-level finance executives in successful accounting, financial planning, and wealth management firms.