Investors are interested in investing in the dream right which is with the world that you envision once you park becomes huge and if that’s the world that they want to be a part of that they’re going to be excited by giving you money now when your son a dream it actually needs to come in a couple packages, so first is the elevator pitch right which is: what can you tell investor in one minute or two minutes?
In the next is what can you tell them in five minutes for 10 minutes?
These are the conversations that you need to have prepared so thoroughly that you can do it even the most surprising an awkward times once you feel like your pitches ready to go what you may want to do is actually say it out loud or even better say it with a friend you’ll be surprised how much harder is as compared to when you’re thinking it in your head now that you have your pitch down the next thing to do is create the materials that you know investors are going to want you to send them and those two materials are your pitch deck and your financial projections your pitch deck isn’t eight to 10 slides or PowerPoint PDF that you can be emailed them and it’s meant to be read and the deck covers topics like:
What problem are you trying to solve, What is your solution to that problem, What is the market for your product and what is the size of that market was sort of competitors are you going to be running up against?
what makes your product unique different and differentiated compared to other things and lastly who’s your team?
And especially what’s the talent on the team now.
Remember that these files are meant to be emailed and read as opposed to present so you’re going to want to keep it brief without any sort of fancy graphics without any sort of fancy animations it’s something investor can quickly reach through in two minutes or less and get a general understanding of if they want to actually have a first date with you.
The next thing you’re going to want to send them is your financial projections and these projections as they are going to be something that you’ll be held accountable to, it’s more understanding for the investor of why your company works what happens when they give you money.
How do you turn that into more money right?
So when we say financial projections are actually going to be sending them Excel spreadsheet that has all the different formulas in place so that they understand what your marketing budget is, what your salary expenses are going to be and what happens when you adjust those levers, for example, if we doubled the advertising budget what happens if we double the size the coding team, what happens right so all these different factors need to be in place that the investors understand the assumptions that you’re making in your business and why those assumptions are realistic.
How to Get in Front of Investors
Now that you have your pitch materials together it’s time to get in front of investors, you may be asking yourself how do I do that, unfortunately there’s no easy answer you actually just need to go network now when you’re thinking about networking it’s helpful to understand that each city there is a startup community that you need to become a part and that means going to the local tech meet up, it means hanging out for becoming a member up the local startup coworking space or incubator, it also means applying any sort of pitch competitions.
The best way to get from investors is through the warm introduction a warm introduction is when where the referral is coming from a trusted source.
So what I recommend doing is creating a list of investors that you have decided are particularly great for your startup and find who those investors have invested in, you can start with an online tool called AngeList, when you identify those founders, approach them in a way that is not too intrusive and that also helps convey the passion your idea and if you can’t convince them that your idea so amazing that they really ought to tell their investors about it they can then do email introduction to you.
Investors, of course, getting an email from someone that they trust will say all right you know what they made it through that filter let’s have met.
The website called AngelList earlier is a free site that allows startups to meet investors and you can use the website in two ways: if you are just starting out you can use it as a directory of investors who should you be talking to who were the right investors to target if you phrase a couple hundred thousand dollars then it’s a great time to use Angeles to finish around and what I mean by that is you can identify people who have a large following on AngelList and convince them to share your profile to the investors that follow them so for example a startup founder with about 400 investors that follow him can click the SHARE button on your profile it automatically will email them with your the details of your profile and helps them understand that you got his vote of confidence that they should look at it too.
So I would encourage you to make a list love the investors that you think are unique we beneficial to your company and then figure out which founders did they invest in that you think you can network your way into.
Investors Terms and Conditions
When you’re having conversations with investors a common question or be what the terms on which you raising to answer that question you need to really understand all the different terms and financing strategies, so let’s go over them we’re talking to investors they’re always going to ask you how much you looking to raise?
And so let me help you understand how to think about this when you’ve when you’re raising money, you need to raise fine of money so that you can hit the milestones that would get you to that next round and that means that you definitely want to raise more than you think, so if to say you know what with 25k we could get so far we could build all these features but you really have to understand it’s more than just features when you’re raising that next round investors will be looking at user growth they’re gonna looking at revenue growth they’re looking at your sales numbers.
You want to make sure that you give yourself another cushion so that you don’t have to be in the awkward situation having to raise a second seed round or third seed round, so that’s why I typically recommend minimum a 500k and above now the next question is:
What valuation are you going to raise that money?
And as it turns out investors are pretty indifferent to anything in a $2-4 M range and when you’re deciding which of those numbers, you want to make sure that the valuation is high enough so that your about 20 percent company.
If you can you get the values and higher you sell less great, but 20% is a great rule of thumb, so here’s how you think about that math if you’re raising say 500k and your pre-money valuation is 2M that means that your post-money evaluation will be the sum up those two numbers 500k plus 2M which is 2.5 million.
So when understanding what percent have the company you’re giving up you simply divide 500k by 2.5M and that gives you 20%.
You might be wondering where these valuation numbers come from?
And as it turns out it’s all made up when you are thinking about the valuation it’s just what’s 20% in my company worth compared to how much everything.
It’s a bit weird that it works that way but remembers am not a professional and also learning too and because your company so young there aren’t really revenue numbers or user numbers just yet.
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