Are you at the point where you are thinking about how to come up with an investor worthy business?
There are a lot of myths and misconceptions about startups and getting funded. Some seem to raise enormous amounts of money almost effortlessly. Even without a novel business idea or a great model or product.
Others find it incredibly frustrating that their genius and much-needed startup idea doesn’t attract the investment capital they expected. So, what do you really need to come up with an investor-worthy business?
The Ultimate Guide To Pitch Decks
It’s Got To Be Really Big
Startup investors are looking for really big paydays. Their own business models dictate they seek out 100x returns. That’s how much bigger the payday needs to be than all the money you will need to raise (and you’ll probably need to raise a lot more than you think).
You can’t just pick a number out of the sky either. You need some good data points to back up your claims too. Make sure you know your market and that the problem you are solving and the product you are providing really has that huge potential.
A Great Story
This is one of the key aspects of how to come up with an investor worthy business. Especially if you are at an early stage. A business that is highly attractive to investors isn’t just one with good facts and figures. It isn’t even one with a perfect product.
You also have to have a compelling story. In fact, storytelling may be the number one superpower you need to turn whatever your idea is into a venture that is magnetic to investors and a fundable startup. It just so happens that this skill is also key to securing customers and recruiting a great team and managing them well too.
In this regard, keep in mind that in fundraising storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
It Is Presented Well
Knowing the best story to tell is a part of this, but so is a visual presentation, the art of delivering the pitch, and knowing the optimal words to use when you need to present in text and slides and can’t deliver it live. You can be a true genius and have technical mastery in product design, but find that has zero correlation to getting funded.
Put yourself in the shoes of an investor and consider what type of presentation is going to get and keep their attention and warrant a check. Utilize our proven free business templates and be sure you are presenting the facts in the right order too.
Assemble The Right Team
For experienced investors, the team is far more important than anything else. Keep this in mind when addressing how to come up with an investor worthy business. The strategies will probably change. The product may well completely change. The business plan will certainly change. What matters is having the right team that can deliver on whatever this ends up morphs into being.
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What’s the right team? One that is committed and flexible is certainly important. The best answer is having the best team to deliver on this business idea. The best team in this space will win. Credibility and domain experience is big. Yet, you really need to be the best in every facet of the business to win.
For example, if you are in fintech, do you have the best finance minds, best technologist and software developers, best marketers in this space, and for every other role? What you don’t have in your founders you can add in advisors, executive hires, and department heads.
A Unique Advantage
Contrary to the common misconception, you don’t need a completely unique business and product idea. In fact, if you do, you may be too early. What you do need is a unique advantage. Something that makes you stand out from the crowd.
A competitive advantage that you can keep on excelling at. That thing that will make people choose to do business with you and protect your business from competitors. If you don’t know what yours is, then you may need to start rethinking your business idea from scratch.
Show That You Can Execute
All the plans and hype and possibilities will only get you so far so keep them aside when nailing how to come up with an investor worthy business. You have to show that you can actually execute and make things happen. Planning and talking about it doesn’t produce results. Plenty of people can talk a good game. Few ever actually take action and make things happen. Show that you are one of those. Create a set of tasks you can cross off and milestones that will demonstrate you can get results. Log all the traction you’ve been clocking up.
Structure & Organization
For professional angel investors, venture capital firms, and lenders this is a business. Being passionate and excited about big visions and missions is great, but the framework and foundation of a real business still has to be there.
Even if investors want to invest, the process of going through due diligence can be a complete nightmare if you aren’t organized. Having the right corporate structure and having your accounting and documents tight from the start can make a big difference in getting from interest to money in the bank.
Make Sure It Can Go Fast
Your business idea not only needs to be able to go really big, and be structured and executed on well, it also has to have the ability to go fast. The business may not fully mature for 10 years, but you’ve got to be achieving big things every year and be proving you can keep up a fast pace of growth every month.
Be Sure You’ve Got The Grit
Even if you check all of the other boxes on this list it doesn’t mean you are going to get a check from the first investor you talk with on the first meeting. It can take multiple meetings. It can take dozens and even hundreds of investor meetings to get that first check. A part of that is designed to make sure you have the grit to persevere through the challenges too.
Hopefully, this post gave you some perspective on how to come up with an investor worthy business.
In the video below I cover in detail how to come up with an investor worthy business.
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FULL TRANSCRIPTION OF THE VIDEO:
Hi, everyone. This is Alejandro Cremades, and today we’re going to be talking about how to come up with an investor-worthy business. There are currently a lot of myths out there. What can you do to really get those investors excited? Is this idea going to stick? Maybe this other idea? Am I going to be able to build the next billion-dollar business? There are, obviously, many questions out there. In today’s video, we’re going to break it down for you so that you gain access to all those insights. With that being said, let’s get into it.
It’s got to be a really big business. The market needs to be really incredible. It needs to be at least $1 billion-dollar-plus so that it justifies their risk of getting into that type of investment because remember that for an investor, the rule of thumb is 1/3 of the investments is going to go out of business; another 1/3 is going to break even, and then another 1/3 is going to potentially give back the money that they lost, plus also some really nice returns. For that reason, they will never invest in a market that is under a billion. Whatever idea that you’re coming up with, make sure that it’s operating in a market that is big enough, that is not going to be limiting, by all means, their returns of that investor.
There needs to be a great story. Ultimately, the earlier that you are in the journey of building a company, the more that you’re not going to be essentially not relying so much on the historicals, but more on what’s coming in the future. For that reason, future and possibilities are absolutely everything.
You want to nail it on the Why, meaning going back to why you actually started with this. Maybe you create that story of why you’re the right individual. The What, which is what you’re tackling. How big is that market? Why they should get just as excited as you are. Then, the How, which is all about how you are going to go into the execution. What’s the roadmap? How are you going to go about it? That’s essentially what you want to do on that great story.
It needs to come from a direction of you being a great storyteller in a way in which they’re ultimately, like watching a movie. You need to get them excited. You need to get them pumped, wanting them, at least really having that excitement from them enough to say, “I’m jumping in this. I want to help you build this business. I believe in you. Let’s do it.”
You need to assemble the right team. The investors, at the end of the day, know that a startup is literally a bus without a direction. Ultimately, you’re going to find the direction toward success if you have the right people seated on the right seats of the bus. For that reason, you want to make sure that anyone that you’re surrounding yourself with for that team are people that have the knowledge, that have the expertise, that have the skill set that is going to lead that investor to believe that whatever is going to come your way, you’re going to adapt to it whether there is a market shift, whether there is a pivot on the business, whether your customers are telling you to go in a completely different direction, and that you are all going to be able to listen to all those data points and to be able to adapt and give them, those customers, exactly what they need to find the product/market fit.
So, essentially, it’s all about getting the right team members. And as they say, A+ people will always hire A+ colleagues, while the B- will always hire people that are B- and even worse than that.
There needs to be a unique advantage, and that could be whether you have an amazing relationship with certain distributors, great intellectual property, something that is defensible, and something that is going to put you over the edge above all the other competitors, and maybe existing companies that are operating today in your field.
Again, it’s all about distribution. Distribution is king, and when you’re thinking about that advantage, it needs to be something along the lines of distribution, which means getting to your customers faster and better, and perhaps even cheaper than your competitors and the people that are currently operating in your segment.
You also need to show that you can execute. The investor, at the end of the day, is like they say: time for the entrepreneur is their worst enemy because the less time, the more chances of failing. But for the investor, the more time, the more that they can see how you execute, the more that they can actually risk the investment. Here what you want is you want to set certain milestones. You want to share those milestones with investors. You want to follow-up with the investors so that they can see, over time, that you’re delivering on what you’re promising them. That’s essentially critical for them to get excited and to say, “Hey, you know what? We met on this point. Now, they are right here. They’ve been managing and delivering every single step of the way, and that is what is going to give them that assurance to say, “This entrepreneur is the one where I want to place my best.
Then are the structure and the organization. You need to make sure that this is incorporated, that you have the right type of setup so that whenever they’re excited enough to say, “Hey, I want to invest in this,” you actually have the entity already formed for them to make that investment.
For this, you’re going to need a really good corporate counsel. Don’t get your cousin. Don’t get your sister or brother that is in family law or whatever type of law that is not as specifically-related to corporate, and in this case, corporate law because that’s going to be problematic.
With that being said, get the right structure from the get-go so that when you’re out there engaging with investors, if there is excitement, you’re good to go. They’re ready to pull the trigger. They’re ready to invest. They know that bank account from the business, where they’re driving the money, and that’s exactly what you want. You never want to be the bottleneck in the process.
Make sure it can go fast. Ultimately, you want to make sure that you are building a repeatable and scalable business model. That’s what is going to get people excited. You need to be able also to make it in a wheel that turns on its own, not a wheel where you need more people so that it turns; it needs to scale. It needs to be able to get big enough and big enough every year with nice multiples on the growth so that people are going to be, “Okay, this could be super big, and I want to place a bet in this business.”
Be sure, as well, that you’ve got the grit. You’re going to have to be persistent. You’re going to hear no many times. You’re going to perhaps have to meet with that same investor so many times until they’re actually able to give you a yes. Ultimately, as an entrepreneur, you should never accept a no for an answer. You should keep pushing yourself because, at the end, a no from an investor is essentially that there are certain concerns that have not been fulfilled. So try to understand what is that concern that is separating you and the money and try to address it head-on.
I would like to see on the comment section below what you’re dealing with and what you’re coming up with. And, again, don’t forget to Like the video and subscribe to the channel so that you don’t miss out on all the videos that we’re rolling out every week.
And take a look, as well, at the fundraising training, which is the fundraising program where we help from A to Z with everything related to fundraising. There you will find live Q&As, agreements, templates, a community of entrepreneurs helping each other all over the world, and you’ll find it really interesting. So, thank you so much for watching.