5 Effective Strategies For Attracting Investors

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    You’re running your company efficiently and financially. There is nothing wrong with a self-funded startup that has 100% equity. However, there are times when you require an investor to fund your concept, project, or startup, allowing you to leverage your company’s growth.

    Investors are a vital resource for entrepreneurs since they provide crucial financial backing for their ventures. Convincing them to join a project, on the other hand, can be a difficult task.

    We’ve put together a list of five techniques for attracting investors to your company that, once completed, will benefit both you and your investors in the long run.

    Topics:
    Factors to consider when building investors trust
    Final thoughts

    Strategies for investors

    1. Create a strong business plan

     Your business plan is a crucial document that shows investors that your company is worth their time and money. Your strategy should clearly state your business aims and goals, and you should demonstrate your team’s knowledge in your sector.

    Following are the key components of a business plan:

    • Market size and assumptions
    • Competitors analysis
    • Organisational chart
    • Financial plan
    • Marketing and sales plan
    • Operational plan
    • Business valuation
    • Appendices

    Define a thorough understanding of your target market by providing a detailed overview of the products or services.

    Your marketing strategy is an essential part of your business plan. It should highlight trend effects and sales possibilities while defining your market size and growth prospects. Include critical parameters like pricing, promotion, and distribution tactics in this section.

    Discuss entry barriers and how you intend to keep competition at bay. Finally, effectively offer your business plan to make it quickly understood by everyone.

    The business model is different from the business plan.

    Because of investors’ experience and familiarity with your sector and market may be more likely to invest in your company. Be aware that their knowledge may lead to more specific questions for you, so be prepared to demonstrate your expertise.

    2. Identify the right investors

     A collaborative partner is far more critical than a blank check.

    The ideal investor will not only contribute financially but will also add tangible value to the business as it expands. You want someone who can improve the product, utilise their professional network, and collaborate with you throughout the firm’s lifecycle.

    Remember that not all investors are the same. Some provide lower capital injections for early-stage growth, while others offer more considerable finance for later-stage growth.

    The type of investor you seek will be determined by the stage of your company’s development and the amount of stock and control you are willing to give up.

    If you’re asking an investor to place a bet on your idea, you’ll need to know your finances. You want them to believe that your figures and concepts are achievable.

    You can also make realistic financial assumptions and thoroughly understand the market you’re entering. A working capital estimate or a cash budget can show this information.

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    3. Soft sell through networking

    It isn’t easy to think about the funds you’ll need and how you’ll get them when you’re just starting.

    On the other hand, soft-selling through networking is a simple method. It is a guaranteed way to get your business out there and introduce your brand to other professionals in your sector.

    Networking events are excellent places to meet individuals in your business, develop new skills, and present your company to the right people. The appropriate soft-sell pitch can land you a deal with investors you wouldn’t have gotten otherwise.

    While there is an art to the organic soft-sell, it can increase investor interest in your company when done well. After all, you’re not just proposing your idea; you’re also relying on the social capital you’ve developed through the networking process to impact their investment decision.

    Check our guide : How to Pitch Your Business Idea to Investors?

    4. Offer a dividend-paying stock

    Offer a dividend-paying stock so that your investors enjoy cash flow rather than just long-term equity.

    The quick financial gains in dividends and a well-designed package appeal to potential investors. In your package, be precise about the amounts invested and predicted dividends, including sample reports. Investors want to see fail-proof investments and provide immediate and long-term profits.

    5. Offer attractive ownership

    Investors put their time, money, and effort into a company with the hopes of seeing a positive return on their investment. If you’re looking for thousands of pounds in exchange for a smaller stake in your company, the investor will most likely decline because there’s not much in it.

    You must be willing to give investors a significant share in your company. When they are ready to exit, they will often receive a substantial return on their investment after four to seven years.

    Investors may expect a more significant stake in your business if you have taken on considerable debt to grow it, as the risk is slightly higher. However, because most firms have debt, it will not discourage provided it is managed well.

    And you can’t just ask for money in exchange for a share in your company. You can also request to utilise your investor’s expertise and time.

    They could be a marketing expert, a sales genius, a financial expert, or a mix of all three. Try to obtain their assistance in their areas of expertise so that you can apply it to your company’s growth.

    Once you’ve found the proper person to invest in your company, make sure you both understand what you’re receiving out of the deal. Consult your corporate solicitor before signing any terms sheets or investment agreements. You can be confident that the conditions will benefit both your investor and your firm if you have the necessary legal support before finalising an investment agreement.

    If applicable, get your business registered for SEIS/ EIS schemes. If all criteria are met, investors can get up to 50% of their investment back from HMRC in tax refunds.

    Factors to consider when building investor trust

    After following the above steps and getting investors for your firm, it’s now time to build trust with the investors not to let them stop providing funds for your firm for the long term.

    1.    Provide consistency and transparency

    Year after year, investors expect well-communicated and well-predicted results. Whether a recently launched startup or a Fortune 100 corporation, achieving these expectations is critical regardless of the organisation’s size.

    Investors also look for a robust financial sheet built for expansion while remaining conservative enough to withstand a challenging marketplace. Investors value organisations that execute the defined process and report on overall business performance against the business plan. Transparency is critical to establishing financial confidence.

    2. Follow environmental, social, and governance standards

    Investors in public, private, and nonprofit organisations increasingly use different factors to determine where they should allocate funds. For example, they look for companies that pursue renewable energy and address climate change as levers to maintain long-term success.

    Investors value organisations that consistently treat their employees and customers fairly and support an inclusive workforce to fuel the organisation’s growth from a social aspect. When organisational leadership exhibits a culture of accountability, investor trust is improved.

    3. Embrace innovation

    Investors want businesses to adapt to market shifts with innovative products or services fuelled by technology and response to new business models. Investors want to see that a firm is not just employing technology effectively to maintain current performance but is also leveraging it for future expansion.

    According to investors, high-performing companies have deeply embedded digital processes that improve the overall efficiency and effectiveness of operations.

    Those trusted organisations that respond swiftly — and precisely — to ride the waves of technological innovation are seen favourably by investors.

    For example, investors hold investments longer when they see a company that uses new digital technologies like artificial intelligence (AI), mobile apps, robotic process automation, etc. and speeds up launching new products and services.

    Hire Startup Accountant

    Work with a London-based accountant for tax, accounting, payroll, & EIS/ SEIS needs.

    Have a question? Call us on
    0203 900 3500
    Monday to Friday 9am – 5pm

    Final thoughts

    Investing is a continual process in which you continuously pitch investors to get a decent investment amount for your business while also using solid business practices to make your company more profitable.

    Spend time preparing your pitch, getting to know your investors, and ensuring that your product is one-of-a-kind. No matter how basic, these strategies will assist you in presenting a profitable and worthwhile business idea to investors. While there are no promises that they will help you, using the methods listed above will put you ahead of the competition.

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      123Financials Editorial Team
      The 123Financials editorial team is composed of seasoned finance and accounting experts with a combined experience of over 20 years. Specializing in UK finance, accounting, and tax-related content, our team is dedicated to delivering insightful and practical advice to startups and small businesses. With a strong background in both the theoretical and practical aspects of financial management, we ensure that our readers stay informed and empowered to make sound financial decisions. Whether it’s navigating the complexities of UK tax laws or providing strategic financial planning tips, our team is committed to excellence and accuracy in every article.