Entrepreneurs and start-ups looking for venture funding or perfecting their pitch will be working furiously to make their firm a feasible choice for investors and an appealing one that will offer big profits. However, recruiting investors for your company is not always straightforward. In this article, we will highlight strategies for recruiting investors to your firm that, if implemented, will benefit you and your investors in the long term.
Have a unique selling point
If your company has a verified unique selling proposition (USP), investors will flock to it like bees to pollen. Whether you’ve developed a quick, low-cost Covid-19 test or operate the only organic, refilled food shop in Nottinghamshire, if you can demonstrate demand and profit (or future profit), you should be able to convince an investor to fund you. A track record of profitable goods and services and a few company accolades can help you gain credibility in this area.
Sell your unique selling point.
It’s not enough to have an extraordinary USP. You and your team must also be able to describe it in a few phrases in a way that piques the interest of everyone who hears about it. If you and the rest of your team consistently and successfully present your unique selling proposition, you will build a buzz about what you’re doing everywhere you go. Not only would this make finding investors more straightforward, but investors may contact you before you’re ready. This is because people in your sector will be talking about what you’re doing, and the media may pick it up without you needing to hire a public relations or marketing agency.
Make a fantastic team.
Perhaps you’re selling a Software as a Service (SaaS) product to the FinTech sector and have one of the UK’s, if not the world’s, top FinTech SaaS specialists on your team, or you’ve tempted someone who formerly served on the board of a big brand like Tesco to work with you. Potential investors will notice and keep you in mind.
Putting together a team of well-known professionals is an intelligent method to attract investors and increase your chances of being financed. If you can demonstrate that they are dedicated to working with your company for at least the next several years and that the whole management team will be easy to deal with, you will gain their favor.
Exhibit commendable corporate social responsibility
Investors are increasingly searching for firms that show a commitment to corporate social responsibility. And the key word here is “demonstrate.” You can’t simply declare you want to be a sustainable and responsible company; you must demonstrate it.
This includes demonstrating, for example, that you are taking steps to create a diverse workforce, that you are constantly auditing your business processes to reduce their environmental impact and make them more sustainable, that you are creating jobs for the local economy, and that you are working to support the local community and charitable causes. Evidence of goals you’ve established and are meeting can assist you in showing your dedication here.
The more you can show investors of your corporate social responsibility in action, the better. Some investors will now only invest in firms that share their values. Becoming a certified B Corporation, often known as a ‘B Corp,’ is a value-based instrument that your firm may use to show a high degree of corporate social responsibility and public transparency.
Accept responsibility if you have not prioritized corporate social responsibility in the past. If you attempt to conceal it, it will come to light during any due diligence investors do. Recognize your errors, describe how far you want to correct them, and make excellent corporate social responsibility a permanent part of your company strategy.
Provide appealing ownership in your company.
Investors commit time, money, and effort to a firm in the hopes of seeing a positive return on their investment. If you ask for hundreds of thousands of pounds in exchange for small ownership in your firm, the investor would likely decline since there isn’t much in it for them. You must be prepared to offer investors a fair interest in your company so that when they are ready to depart, which is usually after four to seven years, they get a sizable return on their investment.
If you have taken on considerable debt to expand your firm, investors may demand a greater interest in it since the risk is thought to be somewhat higher. Still, most companies have some form of debt, so as long as it is handled correctly, it will not deter them from investing.
And you may ask for more than just money in exchange for a share in your firm. You may also request to use your investor’s expertise and time. Perhaps they are a marketing guru, a sales whiz, a financial wizard, or a mix of these skills. To maximize your firm’s potential, ask them for assistance in their areas of expertise.
Provide a dividend-paying stock.
Provide a stock that pays dividends so that your investors receive cash flow rather than just long-term equity. The immediate rewards and a well-designed package make the investment more appealing to potential investors. Be specific about the amounts invested and projected dividends in your package, and include sample reports. Investors want to see fail-safe investments that provide both immediate and long-term returns.
List Their Objections
Making a list of their concerns is one method to boost your confidence and persuade others to invest in your firm. Consider all of the reasons why they would not want to invest. Then, go over the list and find responses to any possible concerns they may have. Being prepared for any inquiries and circumstances will allow you to reply effectively at the moment. They will also be impressed by your confidence and preparedness, making them more willing to invest in your company.
Once you’ve found the proper person to invest in your company, make sure you understand what each party receives from the deal. Sign no terms sheets or investment agreements without first checking with your corporation lawyers. You may be sure that the conditions will benefit your investor and your firm if you have the proper legal assistance before finalizing an investment agreement.