Once an entrepreneur gets their business off the ground, the next step is finding funding. For many new to the world of fundraising, it can be intimidating to schedule countless pitch meetings until you finally find the right person (or people) to support your company. But attracting investors to your new business isn’t as hard as it may seem.
Before you start pitching to investors, you need to show them something of value. One approach is to make samples of your product — although if you don’t have samples or money for samples, you can show them an image of the product or prototype. This will allow your potential investor to imagine how his investment will look. You don’t need a 50-page business plan either, but you will need some slides.
The best approach any entrepreneur can take to prepare for a pitch meeting is to have 10 slides. Some will tell you that 10 slides aren’t enough to convey everything a potential investor needs to know about your business, but this is generally untrue. Investors hear hundreds — if not thousands — of pitches each year. If you show them you know your stuff and can get it across concisely and clearly, you will already have a better chance at securing funding.
However, you shouldn’t pull out your slides during the investor meeting. The slides should help you get the meeting, not be used in it. During an appointment with a potential investor, your goal is to explain your business model and ask for funding. Instead, give them your 10-page investment business plan as you leave the meeting. This is a great strategy to stay on top of their mind and for the investor to show their colleagues and other potential stakeholders.
Here are my top 3 tips and strategies for landing investors:
1. Going small, not big
One way many young entrepreneurs completely waste their time is by pitching to angel investors and venture capitalists. Although these people and organizations have a lot of money to spend on paper, they tend to only invest large amounts of money in a small portion of the projects pitched to them. In reality, venture capital backs a smaller number of companies than one would expect.
An entrepreneur’s biggest mistake is to take “homework” from people with money. If a potential investor says they want a deep dive into your financials or a 50-page business plan, don’t waste your time building one unless you already have it. When someone asks for one of those things, their answer will most likely be no, regardless of whether or not you provide those additional materials.
Instead, new entrepreneurs can be wiser by taking advantage of lower-dollar investors and having a larger investor base. Rather than trying to gain $2 million from one investor, aim to get $20,000 each from 100 accredited investors. People like doctors, lawyers, and local business owners won’t have enough money to back your business alone, but when their investments are combined, your business can have the funding it needs. At the end of your investment round, you might find that some of your original investors return to invest more money at the same valuation — so instead of $20,000, they end up investing $100k-200k. I see this happening again and again, which stresses the importance of following up with prospective investors.
These smaller investors also tend to be immune to changes in the stock market. When the stock market is down, venture capitalists lose money and have less to invest in new businesses. When your investments are coming from doctors or lawyers, their incomes are not dependent on the stock market — their services are necessary regardless of the country’s financial condition, so they will still have plenty of money to spend and invest.
To make this approach even more enticing to entrepreneurs, local investors generally don’t want control of the companies they invest with. Unlike venture capitalists, smaller investors often are not looking for a seat on the board of your business. They don’t want to tell you how to run your company because they know they don’t have the ability or knowledge to do so. As a result, you do not have to cede control over the business you have worked so hard to build in your search for funding.
2. Maintaining investor relationships
The Security Exchange Commission (SEC) dictates how you communicate with investors and what type of investors you can get, as well as the materials and disclosures you must provide. Be sure to speak with an SEC attorney before you ask for money.
In communicating with investors, I recommend phone calls and old-fashioned mail — not email. Send product samples, your printed slide deck, articles, or press releases, but send something every week or month. With prospective investors, remember that it could take 10 phone calls to close a deal. Don’t give up on your third call.
Social media is another tool that entrepreneurs can use to keep their investors informed and in touch with the business’s operations. I recommend you turn your investment-seeking activities (and even your entire business) into a “reality show.” Essentially, record as much of your funding journey as possible and publish it on social media. Record videos of you traveling to meetings, or explain your business model in videos. Don’t be afraid of publishing videos several times per day. Remember: if your company is public, or plans to be, the SEC has specific rules and regulations about how a publicly-traded company can use social media.
Many entrepreneurs also underestimate their most powerful marketing tool: their investors. When your company’s investors are generally lower-dollar, they tend to bring more onto the project, whether because they are happy with the earnings they are getting from their investment or because they are enthusiastic about the brand. Still, don’t expect investors to simply introduce you to all their rich friends — you need to ask for it, and then remind them again.
Some of the best investors you can find are those who will support and buy your product. They are the “true believers” in your business — the people who will talk about your company and products on social media, tell their friends, and wear your branded gear. These investors will be your greatest allies in attracting more funding and ensuring that your business thrives.
3. Overcoming entrepreneurship challenges
Nevertheless, there are some difficulties that entrepreneurs should be aware of. For example, the market itself is very hostile to new businesses, especially public companies.
During the pandemic, many short sellers undermining the attempts of new businesses entered the market and have yet to fully leave. They took advantage of the time when people were struggling financially — with current inflation rates, things are much the same — and this presents one of the biggest challenges for a growing business.
Regardless, none of these challenges are entirely insurmountable. So long as you are passionate about your business and have a vision for what you want it to become, you can succeed. It’s simply a matter of changing your strategy to adapt to these challenges. Attracting investors doesn’t have to be scary for you as an aspiring entrepreneur. Rather, it can (and should) be an exciting step forward for your company.
— Jorge Olson is the Co-Founder and CMO of Hempacco, NASDAQ: HPCO and Green Globe, OTC: GGII, a Fast Moving Consumer Goods company with a focus on R&D and manufacturing processes that is disrupting the tobacco industry with herb and hemp cigarettes.