Securing investment is a critical milestone for start up founders, as it provides the necessary capital to fuel growth and scale your businesses. When it comes to seeking investment, tapping into your close networks can be a strategic approach. Friends, family, and acquaintances who know and trust you can become valuable sources of funding. However, it's essential to approach these connections in a professional and effective manner to maximise your chance of success.
As part of your Equity Crowdfund campaign, we highly recommend you leverage these close networks for the ‘VIP’ investment phase to build some pre-funding before the campaign is opened more broadly. Pre-funding is an important aspect of the campaign and can even dictate the success of a raise. We leverage the pre-funding that companies secure to drive momentum in the raise right from the start, giving confidence to those who have expressed interest in the business ahead of investing.
In this blog post, we'll explore 7 key strategies for asking for investment from your close networks.
1. Prepare and Refine Your Pitch:
Crafting a compelling and concise pitch is crucial before approaching anyone for investment. Take the time to clearly articulate your business idea, its unique value proposition, market potential, and your plans for growth. Refine your pitch by practicing it repeatedly, incorporating feedback, and ensuring that it resonates with your target audience. A well-prepared and confident pitch will instil trust and increase the likelihood of attracting investment.
2. Clearly Define Your Funding Needs:
Before reaching out to your close networks, determine the specific amount of funding required and the purpose it will serve. Outline how the investment will be used to accelerate business growth, develop products or services, expand market reach, or hire additional team members. By providing a clear breakdown of your funding needs, potential investors will have a better understanding of how their support can contribute to your success.
3. Identify the Right Timing:
Choosing the right moment to approach your close networks for investment is vital. Making a financial investment, particularly a large one, will often require some lead time, so be sure to factor this in. It is useful to plant the seed at least a few weeks before you need them to invest, and be clear with timelines, so that when you do reach out they’re primed for the conversation. Opt for a time when they are more likely to be receptive to your request, noting that there might be several follow ups required after your initial meeting to get them over the line, and allow for this in your timeline.
4. Personalise Your Approach:
When seeking investment from close networks, remember that you're dealing with individuals who know you personally. Tailor your approach to each person, highlighting how their support can make a meaningful impact. Emphasise shared values, common interests, or prior experiences that can create a personal connection and inspire confidence in your venture. Show that you genuinely value their involvement and are seeking a mutually beneficial partnership.
5. Present a Well-Structured Investment Proposal:
Develop a comprehensive investment proposal that includes a clear executive summary, detailed business plan, financial projections, and potential return on investment (ROI). Your proposal should demonstrate your understanding of the market, competitive landscape, and potential risks, while also highlighting your unique advantages. Provide realistic timelines for achieving milestones and, where applicable, an indication of the exit strategy for investors.
6. Be Transparent and Manage Expectations:
Honesty and transparency are essential when seeking investment. Clearly communicate the potential risks involved in investing in a startup, along with your plans to mitigate those risks. Manage expectations by discussing realistic growth projections, potential challenges, and the possibility of a longer return on investment timeline. Building trust through open and transparent communication will establish a strong foundation for a long-term investor relationship.
7. Follow up and Show Gratitude:
After presenting your investment proposal, follow up with each potential investor to answer any questions or concerns they may have. Be proactive in providing additional information, scheduling meetings, or arranging discussions with your team. Regardless of the outcome, always express your gratitude for their time and consideration. Maintain the relationship even if they don't invest, as they may provide valuable feedback, referrals, or become investors in the future.
By following the above steps you will get the campaign off to a solid start with great momentum, giving the rest of the campaign the best chance of success.
With these steps in place, you’ll be confident and well-prepared to secure the investment you need to fuel your startup’s growth and achieve your business goals.To find out more about raising capital through an Equity Crowdfund, complete our enquiry form here (add hyperlink to:https://equitiseau.typeform.com/to/l0EUF4) or email[email protected].