The mind of an InvestorThe mind of an Investor

Inside the mind of an investor: Seven factors that will convince them to back you

3rd September 2020
If you want to win investment, it’s a smart idea to get inside the mind of your potential investors. These shrewd people are likely to be seeing over ten investment opportunities per week, and of those businesses, they’ll only invest in 1%. They know that statistically, around 95% of their investment portfolio will fail. So, understandably, they are laser-focused on finding the elusive 5% of investments that will give them a profitable exit and offset the losses the rest incur.

The question is, how do you convince them that your business could be part of that profitable 5%?

Your pitch and business plan must prove you fulfil the seven factors that will convince them to back you. Here’s your guide to those all-important criteria.

#1 You’ve achieved enough evidence of market validation or product traction to adequately prove your concept.

During the bootstrapping phase of your business, you must test and prove your concept. Investors want evidence that you’re addressing a real problem that potential customers experience and that they’re willing to pay to solve it. In your pitch, you need to show that customers are actively looking for a solution, that you offer something that they need, and they are willing to invest their time/money in your product/service. If you can’t convince your investors that your idea meets these criteria, your pitch will be dead in the water.

#2 Your product has strong differentiation from other businesses that already have significant traction.

Not all startups break new ground. You may be aiming to disrupt a marketplace with a product or service that improves on the current solutions or offers something significantly different. In your pitch and business plan, you need to show your points of difference and that the market will be willing to adopt them. Explain your customers’ expectations, how you will meet them and why they’ll choose you over competitors who already have a strong foothold in this market.

#3 You’re operating in a large enough market to meet with your financial goals.

In the startup phase of your Fundraising Journey, you should use credible sources to determine your market size. For example, sources like statistics, competitive intelligence, data mining and market research all help you to validate your market size. Investors want to see that there’s a large enough potential market to drive your profits and deliver a decent return on investment for them. You may want to forecast your potential growth over three to five years to demonstrate the potential in your business plan.

#4 You have the potential to command a high market share.

As a startup, it’s unlikely that you’ll already be in a position to command a high market share. However, you can prove your product/market fit even before you begin to generate revenue. Having established the demand is out there and that you’re sufficiently different from the competition, you can test out your proposed revenue model and strategy on your ideal customer. During these tests, you’ll be checking that there’s value in your business for both your customers and your shareholders. If you can prove that your ideal client makes up a large share of the market and that the product/price fit works for them, you can show your investors that there’s significant potential.

#5 You have a credible team and board of advisors that can make the business a success.

In the early stages of your journey, you’ll likely be operating as part of a very small team. Investors get that, but they want to know you’ve got the right people on board to navigate each stage of your growth successfully. Having access to advisors who can offer their guidance is vital, and it proves to the investors that credible professionals believe in your idea too. They’ll also look to understand precisely what expertise and experience each member of your team is bringing to the table, and how you intend to pull in talent in areas you don’t have covered yet. You don’t need to have all members of the team on board right away, but investors want to see that you have a plan and a credible workforce to move the business through each stage of growth and development.

#6 Your business plan correlates with the financial resources you’ve assigned to execute it.

Don’t go into any pitch with figures that don’t add up. Investors want to know that you’ve forensically gone through every part of your plan and assigned the financial resources you need to execute it. If you haven’t, you will lose credibility immediately. Your business plan should carefully explain the finance you believe is required and what you intend to do with it. Investors want to check this makes commercial sense and that it’s a realistic assessment of what is needed to develop the business. Be ready to answer their questions, to justify your figures and to explain why it’s a viable venture.

#7 You’ve managed to achieve a lot with your existing capital.

One surefire way to win over an investor is to prove what you did when you didn’t have much to work with. Present a detailed showcase of the journey so far and what you’ve managed to achieve during the bootstrapping and friends and family stages of your Fundraising Journey. Whatever traction you’ve been able to accomplish with an MVP (Minimum Viable Product), whether that’s generating revenue or proving customer demand, make sure you show that. It’s an entrepreneurial superpower to be able to achieve a lot with very little. Make sure your pitch includes the compelling story of your journey so far to impress investors and win credibility.

Now we’ve taken you inside the mind of your potential investors, you can prepare to wow them in your pitch. Make sure your critical fundraising assets (the pitch, the plan and the projections) reflect these seven considerations and prove that you are part of the 1% of businesses that they should invest in.

If you want more advice on how to navigate your Fundraising Journey, pre-order a copy of Robot Mascot COO James Church’s book Investable Entrepreneur, below and be notified as to when you can bag your copy for just 99p!

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2020-09-03T11:00:59+00:00September 3rd, 2020|Categories: Advice, Investment|